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Need to borrow money? Financial assistance is no longer difficult to find these days. You’ll find many loan choices for all types of financial needs. Banks, non-bank lenders, and other financial institutions are everywhere. However, because of the many types of loan, borrowing options may not be easy to know.
Note that the loan that might seem to be the cheapest is not always the lowest cost and the best option for your circumstance. Understanding the basics about loans can help you find the loan that best suits your need. Choosing the right loan can be overwhelming if you are new to the credit world. It can be difficult to understand all of the terms and jargons like APR, secured or unsecured, fixed or variable rate, and so on.
Here are some of the basic things to know about loans:
Shopping for the best loan can be complex if you are not familiar about loans. You’ll have to consider many different factors. Moreover, you’ll find many types of loans in the US that you can choose from. Be familiar with each of them, so you can get the loan that best suits your financial need. Loans can either be installment or revolving credit.
Unsecured loan is one of the most common types of loan in the US. Approval for this loan is based on your personal and financial background, such as your income and your monthly expenses. These loans does not require you to have any collateral.
You can use unsecured loans to consolidate existing debts, make a small or large purchase, to spend for a vacation or for home renovations. You can borrow for as much as £50,000 or more with some lenders as long as you have a good credit rating. Loan terms are between six months and seven years, depending on the loan amount.
For bigger purchases or expenditures, you can opt for secured loans. With secured loans, you can have a lower interest rate because the loan will have a guarantee, which is your property or any personal asset. You can use the loan to purchase this asset or use an asset you already own such as your house, vehicle, jewelry or other valuables.
Mortgages and home loans are for purchasing a property while car loans or auto loans are for the purchase of a new or used vehicle. You can usually get these secured loans from bank.
Lines of credit or overdrafts are revolving forms of financing, which are flexible that give you access to credit as and when you need it. With a revolving credit such as that of a credit card, you can use up to a specified limit and only pay interest on the amount you use. Other forms of loans in the US are short-term loans, which are designed to help those who need emergency funds, student funds, those with bad credit rating and for those with no credit at all.
A personal loan is a type of unsecured loan. Just like other types of loans, you can get a personal from banks or non-bank financial institutions. Personal loans can be small and short-term loans or large in amount over a long period.
Since personal loans are unsecured, approval is determined based on your personal circumstances and financial status. The lender will look into your income, credit history, employment history, capacity to pay, among others.
You can use personal loans for just about anything. The lender will not ask you or monitor you on how you will spend the money. You can use the money for home repairs or renovations, special occasions like weddings and birthdays, vacation, college education, purchase of latest gadgets or home appliances, unexpected medical expenses, or any emergency costs.
Loans Direct Lenders
A direct lender will be working with you from the start to end of your loan experience. From processing your loan request to approving your loan and transferring the funds, to collecting your repayments until the end of your loan contract.
You deal with the lender itself and not go through other financial companies as such with loan brokers. With a direct lender, you fill in an online form with your details directly on the lender’s website, directly negotiate with the lender, and have your payments collected by that same lender.
With a loan broker, you are working with an intermediary. You fill in an application form on the broker’s website, and then they will reach out to different lenders, forwarding your personal details to them for a fee or commission. Unlike working with a direct lender, a loan broker will make the selection for you. So, expect that you will be receiving a lot of phone calls, emails, and text messages from different lenders and financial institutions, offering you loan products.
Working with a direct lender means the search is faster, you choose the lender yourself, and you will not be paying any fees or commission for the broker. On top of that, there will be no risk of having your personal and financial information passed around the internet to other loan brokers and lenders.
But, this does not mean working with a loan broker is a bad thing. Working with a broker can also be beneficial for you especially when you have no time to spare searching the internet for a loan provider. The broker will do the job for you, making your life easier.
Loans for Poor Credit
Having a poor credit score can make it more difficult to qualify for a loan because you are considered a high risk borrower to most lenders. However, it is not impossible to get a loan with a poor credit. May lenders are now specializing in loans for poor credit. The drawback, however, is that you will have to pay higher interest than those with good credit
The rates and fees vary from lender to lender, so take time to search and compare different lenders to find the lowest possible loan cost you can get. Compare not only the rates and fees, but also the lender’s loan terms and conditions.
Banks usually require their borrowers to have good credit. Therefore, it will be a bit of a challenge for you to get a loan from a bank with poor credit. You can find bad credit loans offered by non-bank lenders online, credit unions, and peer-to-peer lending.
No Credit Check Loans
If you have bad or poor credit, it is recommended that you apply with a lender that looks at more than your credit score to qualify for a loan. These lenders usually operate online, advertising no credit check loans. They will focus on assessing your affordability and personal background. These lenders will look at your employment record, monthly income, and makes sure that your address matches the one on your banking details.
When you’re considering a no credit check loan, take your time to check the reputation of the lender. Getting the right loan and the right lender will definitely save you a lot of trouble. Aside from finding a cheaper option, you can also have a chance to filter out illegal or unauthorized lenders and loan sharks, as they are abundant online as well.
Payday loans are small and short-term form of credit usually targeted for those with poor credit or no credit yet. These loans typically have very high interest rate as compared to standard loans or those that are available for people with good credit.
If your credit score is low, expect to have sky-high interest rate on your loan. More so, with payday loans that are fast and hassle-free. That is why, payday loans should only be used for emergency expenses only or only when you need money badly and you have nowhere else to go. The amount you can borrow will depend on your income range.
The terms and methods of paying back payday loans depend on the lender. Lenders may ask you to write a post-dated check with the amount of the loan cost, and will cash it on the agreed repayment date. Some lenders will ask for your bank details and will withdraw the loan cost electronically or will let you leave your ATM card and hold onto it until your payday.
While most payday loans are settled in two weeks or when your paycheck arrives, some lenders allow installment repayment for several weeks or months until the total loan cost is paid up.
Familiarizing and understanding loan jargon, rates, fees, terms, and all other facts about loans is the key to get the best loan, the one that suits your needs best. Knowing the ins and outs or loans can help you make a good comparison of the different loan options available for you. You will also be able to save time and money.
By comparing loans, you can find which one works for you and your budget. By using online tools and calculators, you can project what you’ll be paying over the loan term of your choice. This way, you may even find ways to save and be efficient.
You can either work with a direct lender or loan broker, depending on your personal preference and need. Either way, you can gain benefit and have the money you need.
Representative APR 278% Representative Example: £500 borrowed for 90 days. Total amount repayable £672.60. Total Interest £172.60. Interest Rate 140.0% (variable)