Admit it or not, but we are part of an era where finances are one of the most complex aspects of life. Some banks use a lot of technical jargon to puzzle you and then there are advisories to help you understand better but we all know how often that works.
A common man in need of money just understands the term that helps him get loans. That’s right! Something that is very easily accessible for everyone and every time. That can be availed by anyone who meets the bare minimum requirements to qualify for it. Like having a good credit history or something to mortgage against the money.
A study in 2018 showed that over 34% of Americans take personal loans for reasons ranging from education to marriage or catching up with stacked up bills. And this figure doesn’t even include the faction that considers taking business cash advance.
Just to make life a little easier while considering the option of taking a loan, here is what you should know about all types of loans:
You Don’t Need a Bank
Most people imprint the picture of a bank in their heads when they hear someone talking about loans. But as the times have progressed, the options have expanded along with it. Currently, there are a lot of merchants and money lenders that could entertain the idea of giving you money depending on your needs and background.
The term in fashion for this type of funding is Merchant Cash Advance (MCA) financing that allows you to get the money almost instantly with a fixed MCA rate factor. This also has a fixed payback amount the regulations of which vary depending on the amount, nature of expenditure or mutual understanding.
What makes these types of loans most approachable is that it doesn’t require security or charge interest. On top of it, you can choose to pay it back by a fixed amount over a fixed period or by a pre-decided percentage of your earnings. Hence, making it the most feasible option on your table.
Collateral or Interest
If it’s a bank that you have turned towards, hoping your plight for financial assistance to be answered, then watch out for these two things i.e. Collateral & Interest. Banks only lend money based on good credit history, ensuring that you will pay back, or some property of equal value which they can cease, in the worst-case scenario.
These types of loans are called secured and unsecured loans. The idea even goes as far as getting you home equity loans that offer you money against the share of a property you own. They generally have a lower interest because they qualify as secured loans. Besides this, credit card cash advance is another one of your options while trying to pull some fast cash out of your sleeves. Whichever of these options you are considering, make sure to draft a strong repayment plan to avoid ending up on the road or losing your vehicle.
When you Should Consider Taking a Loan
We must face the fact that all of us can be held accountable for the sin of gluttony and greed. Being entirely honest, that’s not a crime but it certainly is not a reason good enough for you to consider getting a loan. Getting a status symbol at your disposal always comes secondary to maintaining your basic lifestyle. So unless your finances are at pits, the best option is to avoid getting a loan.
If you are in a stalemate situation and have no other options, remember that no one knows how much you can pay every month but yourself. Simply qualifying for a large amount doesn’t mean that you can match any interest returns that the bank or a private money lender demands.
Always make sure to devise a strong repayment plan instead of trusting a third party and making a rash move. Besides this, your best option while taking a loan is to turn the amount into a moneymaker for yourself. Like, invest it into your education or business that eases the burden of installments alongside making your ends meet.
Always exercise caution when someone is being extra nice or using language that is too dense for you to penetrate. Its way safer to understand the concept by asking questions a couple of times and avoid embarrassment by falling behind on your EMIs and risk losing your property.
What Influences the Interest Rates
If there are no alternatives besides getting a loan, then it’s best to know how you can get the least interest rates and lowest EMIs to make repayment easier. Loans that are taken on an emergency basis or are unsecured, tend to have higher interest rates compared to secured loans.
Besides, there are categories amongst these that are considered semi-secured, allowing you to bring down interest rates but the risk is as great as in the case of a secured loan. These types of loans can be referred to as home equity loans and title loans.
Home equity loans grant the moneylender the right to cease your share of the property. Whereas title loans require you to surrender your car title unless you pay off the loan along with the fees and interest. Goes without saying that failing to do so will result in you losing your car for good.
Another risky option to make some breathing space for you is to get a payday loan. With almost exploitative fees and interest rates, these loans are generally deducted directly from your bank account on the day you get your salary deposited.
Most lenders even prefer post-dated checks. With the ball in your court, it depends on how optimistic you are feeling while sorting your finances.
Managing your finances is no easy task and very often you may find yourself running behind on some bills or payments. It could drain the life out of you as you try keeping up with all the payments smoothly. But in acute need of money for multiple reasons, loans are certainly a safe option.
However, extensive homework is required before adopting such a course of action. Declaring the figure that would help you sort your shortcomings and then reviewing your options seems to be the best way to deal with it.