Today’s hard times sometimes make it impossible for many individuals and families to make ends meet. Even if you have a steady job, chances are there will come a time you will need additional cash to settle unexpected expenses that would suddenly come your way and the only way to resolve this to apply for a monetary loan from any loan company or lending institution.
A lending institution is a financial organization that offers loans and there are various kinds of lending companies that exist in the financial market today. Such institutions come in the form of banks, mortgage, and payday loan companies. The type of loans offered by these institutions vary but the repayment protocols and interest rates provided are usually the same or at least within the financial market standard.
Banks are the most common form of the lending institution because one of their main functions is to provide a different type of loans such as mortgage or personal loans to their clientele. Banks are perhaps the most versatile among the banking institution because aside from the fact that they carry and provide all kinds of loans to various individual, they are also a depository for cash and other valuable items for their clients. This is perhaps the main reason why most people would think of going to a bank first to apply for a loan than to go to other kinds of lending institutions. Banks, more specifically commercial banks are the number one provider of business and mortgage loan and this is because of their very competitive interest rate and their loan procedures and processing are one if not the most client-friendly in the financial market.
Other lending organizations include credit unions, E-commerce or internet banks, savings, and loan association. Non-banking institutions that also lend money out are brokerage firms and mutual fund companies. All of these types of lending companies whether banking or non-banking organizations offer various loan services to both individuals and businesses. There are lending companies that specialize in specific types of loans such as a mortgage company that specializes in providing mortgage loans or home equity loans that will allow the borrowers to refinance an existing loan with another institution, borrow funds for house renovation or to simply purchases a residential property.
Applying for a loan can be very tricky and if you fail to choose the right lending company to borrow money from, you just might end up losing a lot more. It is important that you take the time to compare various offers from these lending companies by comparing their interest rates and how it is calculated. More importantly always read the fine print of the loan contract. This might just save you from a lot of headache and money lost.
Most people nowadays tend to look at loans as a means to make their dreams come true. Either it may be a small property by the beach side. An apartment in a posh part of town or a sports car to get you from point A to Point B. If it were that easy to secure loans everybody would be driving sports car rather than commuting would it? It would seem better to see loans from what reality is. Here are some lending tips at least to get your loan approved before shopping for that nice sports car you have been dreaming about.
A loan is basically a means to an end, it is a means to survive to have ample shelter, drive a decent car and buy normal clothes so you won’t is out of fashion anytime soon. Loans are a means to be able to get credit as a means for commercial transactions. Here are some basic lending tips you ought to know before applying for that business loan that would make you a millionaire overnight.
- Be concise. What are your plans for say a business loan, always have the proper documentation to back up your plans. Be ready with all the banks or lender’s requirements for faster processing. A borrower has to appear pretty sure of what he or she is going to do with the loan. Any lapse on the part of the borrower even if it is just the look of uncertainty the lender will probably reject that application
- Be ready to shell out a portion of your own money. Even in mortgages or housing loans the lender will not lend any borrower the full amount that person needs. In essence a borrower must actually share capital with the lender, as the lender will not shoulder all the risk in losing money as the borrower has shown confidence in his or her choice of investment.
- Legal advice. Always with money comes complications and a simple way to avoid these complications is to have legal advice if you can afford it. If not, look for anyone who can explain the fine print of the contract you are about to take out to avoid minor and especially major complications that usually arises with loans.
- Negotiate what you can afford. Rates for some loans are not fixed so there are times wherein you can get a better rate. This is basically true when dealing with broker’s whose earnings depend on commissions and have a little leeway in bringing their commission down and cut costs.
These are not all you need to know, these are simply but lending tips a borrower must go over for a better loan experience.
They said that a payday loan is a saviour, as it is the easiest and fastest way to borrow money from a lender in a tight situation. Or would a payday loan be considered a curse due to the fact that a payday loan usually leaves the borrower’s pay check less and thus a borrower would continue the cycle taking out another payday loan for the next payday to cover the fact that this payday that person pawned in his or her pay check and unless a miracle happens the cycle continues on and on till the borrower is buried in interest and in debt.
What are the pros of this kind of loan?
Hard to believe but there are actually some. During emergency situations this type of loans is the easiest to acquire, usually, the only thing needed is the latest payslip as proof of your salary. With the only a few hours of processing one could take out a loan especially if the situation calls for immediate cash. Unexpected expenditures are a part of life, and a payday loan is a simple answer to that although a borrower should always think twice if the said expenditures are actually needed since the interest and financial repercussions are graves.
A payday loan will also bring immediate relief to the needs of the borrower it will be short-lived. In fact, anyone can say that it would be a short-term relief as the problems of being financially short will recur as soon as the next payday comes about.
Pawning in your pay check so to speak can be a recurring problem plus a substantial amount of interest above the pay check since it is very seldom that the interest will be taken off the principal cash released to the borrower and usually it would be charged on the payment date, over the pay check, unless that the borrower has enough surplus to pay the interest and live off the said surplus till the next payday. Chances the borrower would have to take out another payday loan to survive until the next payday.
As this is already a problem for the borrower, and the cycle of debt continues. Some borrowers even would compound their problems by pawning in their pay check to multiple lenders come payday the problems are compounded because the money and interest are far above the value of the actual pay check. And thus the next pay check is already allotted for one loan and the next one to the next and so on and so forth. With compounded interest, the borrower has to take a larger amount to cover the compounded loan. In which case would also be hard for the borrower since his or her line of credit is greatly tarnished and would have a very hard time to take out another loan from any other financial institution.
There are legitimate lending institutions that actually specialize in loans that are more than beneficial to itself, whereas the borrower gets the raw end of the deal. A good example of this is a lending institution that deals only in car title loans, these are actually the type of lenders you should avoid, granted that lending companies are at an advantage when it comes to profit, these companies thrive on a borrower’s desperation. A lot of these lending companies are legal in nature but even in the most desperate situation, these companies should be avoided.
Before entering into a contract with these financial companies it would be best to actually exhaust all options and even then think more than twice as these are the type of lenders you should avoid.
- Car Title Loan Lenders – These types of lenders charge an exuberant amount as they would take your automobiles papers and loan you about 25 – 50 percent the total value of your vehicle and if you should default in repaying these companies re-possess your vehicle and sell making a very tidy profit from the amount and interest that you have already paid and profit from the sale of the vehicle.
- Cash Advance Loans – Although banks and credit card companies carry this type of loan and are as legit as they come, they are also at times guilty of over profiteering off borrowers since cash advances usually have a 3% – 5% interest over the regular loan interest and starts once the money is withdrawn
- Pawn Shops – One of the type of lenders you should avoid are pawn shops as these types of institutions give low appraisals, have high rates and a minimal time frame to repay your loan and redeem the item you have pawned in (i.e. jewellery, watches, or anything with value). Aside from the interest, there are also add-on fees to these interest, most of the time in the form of storage fees, Service fees and at times fees for lost pawn tickets.
There are also lenders that only appear to be legitimate. When in truth, these are just scam artist out to really take advantage of a borrower’s desperation. Now, these are the types of lenders you should avoid totally. As these scammers would find a way to extract from the borrower what they already don’t have cash. Usually, they ask for a deposit to show ”good faith” or as a “down payment” for a loan that will never materialize. A tell-tale sign of this is that the scammer is not interested in any documents not even in a borrower’s credit history, wherein there lies the evidence that the borrower can repay the loan.
Nowadays, credit (rating and history) is as almost as important as your Social security number or even your driver’s license. There are a lot of ways to build credit by means of a bank-issued credit or debit card, or another way is by taking out a loan and making good on the said loan. In this day and age building credit is important as most financial transactions these days are turning out to be cashless and as most of the commercial transactions are based on credit.
So the question would actually be how does one build credit? Or how to get a loan to improve one’s credit status? Here are some tips on how to get a loan and build credit.
- First, know what is your personal preference? Would you rather apply for a loan rather than having a credit card and if so, what kind of loan are you looking for? How to get a loan and what to use it for? A small loan would be a good place to start as to credit cards that are used in most commercial transactions it is easy to get lost in what you have already spent, your limit and how much you have to pay on a monthly basis. As against a small loan wherein the amount approved will be derived from the actual amount you can pay.
- Do not forget to ask questions. If you are already heart set in building credit through applying for a loan, then do not be afraid to ask questions as these questions will speed up processes on how to get a loan. As the borrower would know beforehand, his eligibility for a loan. The requirements needed, whatever materials or documents the financial institution or bank require its borrowers.
- Know your limitations and expectations. Always make a checklist of everything you need in acquiring a loan as to speed up the process, knowing what you need, and having them on hand before your application will always be a big factor. As well as having all the requirements from creditors if any, employers and other financial Institutions if needed. Know your limitations, including your personal credit history if you already have one. Based on your cash inflow you should know your financial limits and more importantly the repayments of the loan you can afford. If all goes well and borrowers have fully used themselves they would know exactly what to expect, as to the protocol in how long the duration of the loan approval and release will take. The specifics of the loan, the borrower’s goal on repayment of the loan and off-hand the chance of being denied the loan, there are still other options on how to build credit.