What loan options do i have?

What Loan Options Are Available?

You need to really sit down and think about your options before taking out a loan, especially if you don’t have security like a home to back it up.  There might be another option available to you that you haven’t thought of yet like a rich relative or even maybe your credit card.

Although borrowing money from a friend or relative is a tricky business, there might be a chance that you can work out a business contract with them with set terms and even interest rates.  Always be professional with these types of loans however or you will run the risk of losing your friend or relative’s trust.  Make sure that both parties draw up a contract together, sign it, and each keep a copy.

Have a look at your credit card documentation if you are considering using it as a source of credit.  Its much easier to get a credit card although you must bear in mind that interest rates will invariably be higher.  One plus with credit cards is that they are more flexible than loans when it comes to repayments.

Have you looked beyond your bank and other major banking institutions?  There might be other financial institutions that will be more approachable and some of them might even offer lower interest.  Other than lenders, you can also consider maybe contacting a credit union or a community bank.

Try to remember the importance of the “human factor” especially if you have some bad credit history.  Try approaching a lender with whom you have done business in the past.  They might cut you some slack because they see you as a familiar face.

A common mistake is to apply for multiple loans when you are desperate for money.  Remember that financial instructions keep track of loan applications and if they spot several they might consider you to be too desperate and this can lower your credit score.

Make sure that you are clued up on what’s on offer.  Do you know what APR stands for?  Do you know what the difference is between a fixed or variable interest rate?  What fees will be charged on top of interest, and will these be paid up-front, monthly or annually?

Make use of online transactions to save money.  Not only are these transactions far more convenient, they can be done in the privacy of your own home and they are much cheaper than doing the same transaction over the counter at your bank.  You can use the internet to check you balances, transfer money or pay your bills.

Being honest with your lender can count in your favor and open up possibilities you did not know of.  Tell your bank or lender why you need the money and you might be surprised with the different loan options that they can come up with to suit your personal circumstances better.  Various loans are designed to cater for specific needs i.e. commercial loans, home equity loans, car loans, leases and many more.

Tips on loan types available and payment options

A loan is a type of debt in a process whereby money is redistributed between the creditor and the debtor for a certain period of time.  The money has to be paid back on a certain date and the lender charges extra money or interest as payment for the loan.

Most loans fall into two broad categories: unsecured personal loans and secured or homeowner loans.

With unsecured personal loans you pay monthly instalments and interest.  The interest amount is usually fixed with this type of loan.  As you are not offering the lender any security like for instance you home they will take legal action if you stop paying your instalments.  Interest on unsecured loans varies but it is normally higher than what you would pay for a secured loan as the lender is taking a bigger risk by lending you the money without security.

A secured loan is what is called a personal loan, which means you are taking out a loan on a mortgaged property or a vehicle and offering this as security.  These loans should not be taken out lightly as you will risk losing your home or car if you default on the payments.

There are many different formats of loan types available.  Banks introduced the concept of formal lending but nowadays there are a great variety of other lenders available.  Some individuals prefer lending moneys from lenders as apposed to banks as they seem to be more willing to lend out money and more relaxed with their terms.  It’s important to always research your options before deciding on a lender.

Be sure to always read the fine print on any loan agreement.  Look out for extra charges that may occur or if there will be a penalty fee if you pay back the loan earlier than planned.  Another important term to look out for is the loan’s APR, which stands for Annual Percentage Rate.  You should receive documentation with a layout of the loan APR.  The APR is a good indication of the real cost of the loan as it will point out the interest that you are paying as well as any extra charger that the lender is charging you.

Remember that a good credit history goes a long way in helping you to secure loans.  How you handle your money and loans today will be an indication of lenders trust in you in the future to pay back instalments.  It’s important to always make sure you can pay back your loan each month and to not apply for more than one loan at a time.  Also try to always pay the money back in the shortest period of time, as this will save you interest costs.

If you are in any way uncertain of your ability to pay back the loan and you have no other way of borrowing the money, consider maybe taking out something called loan insurance that will pay back your loan if you should maybe lose your job or fall ill.