Loans

person-smartphone-office-table-largeA loan is money or credit that is borrowed then paid back over time, typically with interest. There are different factors that affect loans. There are many different types of loans, some are geared toward specific purchases, such as homes or vehicles. There are also specialized loans for debt consolidation or personal loans. Depending on your credit score and what the loan will be used for will determine the best loan options for you.

Loans based on your Credit Rating
What your loan is based on will differ between lenders. Some lenders will offer different interests rates depending on your credit scores. Your credit history will help determine what the lender will offer you with regard to your loan. If you have any delinquencies or a bankruptcy that will negatively impact your credit score, which may lead to higher interest rates if you obtain a loan. For those with a high credit score, lenders may offer lower interests rates or other special offers. Many lenders have online inquires or calculators that can help estimate your repayment schedule and your interest rates. These online calculators are just provided to give you a snapshot of the potential loan but it can help give you an idea of the best loan for your situation.

Bank Loan v. Lender Loan
There are always a lot of questions once you decide to obtain a loan. One of the first questions, should you get a bank loan or get a loan from a private lender? There are important things to know about each before deciding which one to go with. Some people prefer bank loans since most of the time they offer lower interest rates. Banks are also typically able to lend more money since they have access to federal funds and depositors. You may find though, that it is harder to obtain a bank loan if your credit score is suffering since you appear to be more of a risk to the bank. Private lenders are more likely to offer loans to those who have a less than great credit score or offer a loan for bad credit. Private lender loans rely on funds from investors. They also require higher interest rate, which means that you will be paying back more money. Depending on the small print of the loan requirements, private lenders can also change their rates which can cause headaches down the line. Unlike the private lender loans, banks have other outlets to make their money but they also have more strict requirements. It is typically easier to gain approval and obtain a private lender loan when compared to bank loans.

Secured Loans v. Unsecured Loans
hands-woman-apple-desk-largeJust as there are so many aspects to the loan process and what loans can be used for, there is also secured and unsecured loans. Secured loans are those loans that are granted because there is some sort of collateral or asset that is used to protect it. For example, a new car loan is a secured loan since the new car is the asset that is protecting the loan. If you fail to pay on the secured loan, then the car is taken as collateral. In order to obtain a large loan amount, a secured loan is typically the best and sometimes the only way. Secured loans can be used for new items as well as loans such as home equity or home equity lines of credit. The collateral that is used for the secured loan is there to protect the lender and set as a promise or a pledge by the borrower to pay off the loan.

Unsecured loans are the complete opposite of the secured loans. Unsecured loans can come in many forms, such as credit cards, educational loans, and personal or signature loans. The loans carry more risk for the lender which means that there is more for the lender to lose. That is way there are typically higher interest rates and higher monthly payments. When you apply for an unsecured loan, you are judged on the five C’s with regard to your credit: character, capacity, capital, collateral and conditions. The lender will look at each of these characteristics and determine the borrower’s creditworthiness. The better each factor appears will determine if an unsecured loan is approved as well as the terms to the loan. If you have been declined to get an unsecure loan after applying that does not mean that you cannot obtain a secured loan. Your own personal financial situation will be reviewed to put in the right position for a loan.