Guides To Borrowing Money
When it comes to borrowing money from any financial institution, everyone has been there at some point or time. However, it really does help if you understand how the different loans work. Ultimately, each loan has slightly different criteria, and also different requirements when it comes to paying it back. So if you can understand each type of loan, then you know exactly what is suitable for you in which situation. So let’s discuss the different types of loans available:
Secured loans are typically for borrowing large amounts of money. Ultimately, you borrow money against an asset. A home loan is a secured loan because you are borrowing money against the value of your property. The advantage of secured loans is that you are able to borrow a large amount of money over a longer period of time and interest rates tend to be much lower than other types of loans. However, in the event that you default on a secured loan, you stand the risk of losing the assets that your loan is secured against.
An unsecured loan is usually available in small amounts. Unlike secured loans when it comes to unsecured loans there are no assets tied to that specific loan. These loans are usually for small amounts and need to be paid back very quickly. Ultimately, if you default on an unsecured loan, you still stand at risk of consequences.
A bridging loan can be described as money in advance. If you have any money that is due to you, such as money from a property transaction, provident fund or pension then you can definitely take a bridging loan against this lump-sum. However, any financial institution will still want some type of security so you will basically need to prove to them that the money you are going to receive is definitely guaranteed.
Bad credit loans
These types of loans are for people that have a bad credit history. So if you have borrowed money previously from any credit provider and failed to pay back or haven’t paid it back timeously, this will definitely deflect on your credit score. However, there are still lenders out there prepared to offer loans to people with a bad credit score. However, you will need to offer some type of security such as your home or your car if you own them. Ultimately you are also able to get a bad credit loan even if you don’t have any type of security however, it will be a significantly smaller amount.
Home improvement loans
If you are planning on doing any type of home renovations, you can apply for a home improvement loan. In most cases, people are self-employed can also qualify for these types of loans. The difference with this loan is that it is usually paid out in increments as opposed to one large lump sum. Ultimately, the advantage is that your instalments are only calculated on that percentage that you have already been paid out.
Payday loans, short term loans and credit cards
Payday loans are basically subject to you proving that you are employed. In most cases a payday loan is a very small amount and usually needs to be paid back within 30 days or on your next payday. Short-term loans, as well need to be paid back in a time frame of between 30 to 90 days. When it comes to credit cards, different providers will have different requirements. However credit card payments are usually made once every month in instalments.
A doorstep loan basically is delivered to you in the form of cash to your door. Ultimately, since it is given to you in cash it is also required to be paid back in the form of cash. In cases such as these you don’t need to have a good credit history or even a bank account to qualify.
Debt consolidation loans
What happens when it comes to debt consolidation loans is that the credit provider will take all of your accounts or debt into consideration and agree to pay them off for you, and all you have to do is pay them one convenient monthly installment each and every month.
If you do not have any type of security when applying for a loan, you may use someone who does have a good credit history and security to vouch for you. In cases such as these if you default on your loan repayment, the guarantor is responsible to pay back the loan.
Most people who do not have money put away to purchase a car once off, usually resort to car loans or car finance in order to purchase their first vehicle. The normal criteria does apply when it comes to qualifying for this type of loan.