The word ‘loan’ is already common that it is almost impossible for people to not know it by now. Of course, not everyone has received a loan to purchase something. A loan can be very helpful in some occurrences. However, keep in mind that it can cause trouble as well if you don’t get to pick the right one.
A loan can be very helpful for your financial situation especially when you are starting business. Lots of people see loan as bad idea. However, it is not as bad as what most people thought. Lots of people have gained success through loan or get their financial problems solved.
What is a loan?
A loan is not only in a form of money even though it is the most common form of it. It can be property and other material good given to someone in exchange for future repayment. The value of the loan should be repaid along with the interest or other finance charges. Keep in mind that there are many types of loan so choosing the one that you really need is necessary.
A loan can come from governments, financial institutions, corporations, or individuals. For lenders, they offer loan for those who apply for it. They use the money supply to expand business so the cash flow still run. Their revenue is mostly from the fee and interest. Some loans requires borrowers to surrender some collateral while some others don’t.
The requirements of applying for a loan can be different for every financial institution. The amount of interest is also different from one lender to another. Each of them has their own policies regarding to the terms. Thus, it is important to be thorough before signing any document or making transaction. It is also important to remember that there is the length of the time before repayment is required. Failed to meet the deadline usually ends up to additional charges.
About the loans
Loans come in various types. Each type requires different requirement and affect the cost as well. Secured loan requires collateral from the borrowers to be surrendered to the lenders in order to receive cash. The collateral is varied. It can be car, house, boat, etc. if the borrowers default o can’t pack bay the loan, the asset or collateral will be under the lender’s possession. Examples of secured loan are car loans and mortgages.
Unsecured loan is like the opposite of secured loan but it is not as common. It doesn’t involve any collateral so if the borrowers can’t pay back the loan, the lenders don’t have anything to take for their possession.
This type of loan is quite risky for lenders but preferred by borrowers. Examples of unsecured loan include signature loans and credit cards.
Knowing about loan means you also need to understand about interest rate/ it plays important role in loan. Keep in mind that loan with higher interest rates means higher monthly repayments.
It tend to be longer to pay off as well. That is why borrowers always tend to do their research and comparison to find a loan with low interest. Nobody wants to spend their years spending their hard-earned money to repay their loan.
You need to learn more about interest rates because they are also varied in type. For example, there are what you call simple interest and compound interest. Simple interest is interest on the principal loan.
Meanwhile, compound interest is interest on interest. It means borrowers has to pay more because it is not only on the principal but on accumulated interest on previous period as well. thus, make sure to comprehend anything before applying for loan.
Still Confused On Choosing The Right Loan? Here Are The Best Answers. Talking about choosing the right loan is indeed not a simple thing. Because indeed it seems that every problem related to finance is never simple. From the beginning until now borrowing money has often been the first choice for some people to get money or funds, which aims to be used as a personal funding solution, or as a complement to business building budgets.
Currently, lending can be done in various places, such as private banks or state-owned banks, then other financial sources can be obtained directly, even those that can be accessed quite online. But often not all money lending is accompanied by serious consideration. Though later lending money carried out carelessly will run the risk of causing losses in the future. The following are some things to think about, for consideration before making a money loan.
Is Lending Money Important Or Not?
Ask yourself first, is borrowing money an urgent need, or can it be postponed? Sometimes the desire to borrow money can indeed arise spontaneously, due to several urgent needs. But avoid doing loans because the needs are not too important. Borrowing money without careful consideration of your needs will be very risky making you not committed to carrying it out. Make a loan of money if you need a loan of funds, for things that are very urgent and important. Piling up debt to buy things that are not important will only add to your burden.
Can You Afford It Or Not?
This might sound like a very cliched question, about whether you can pay off your loan repayments or not. But actually, this question is the main basic thing, before you apply for a loan. It would be very good before deciding to borrow someone first to weigh the cost to pay. So that later it will not be difficult to pay it off. Because there have been many cases that occur, when the deposit is stuck, then your life will also experience difficulties simultaneously.
Before deciding to make a loan, make sure the income you have still had room to pay interest. Don’t forget to also calculate the amount of the loan that you can handle. Don’t take out loans that exceed your financial capacity. Simply put, you can start calculating whether one-third of your salary can be set aside to pay for it or not. Setting aside a third of this salary will prevent you from financial deficits each month. Also, make sure your primary needs can still be bought, and the important things can still be covered properly. Don’t forget choosing the right loan is also very dependent on your budget capability.
Pay Attention To The Source Of The Loan
Never choose a source of borrowing whose credibility is unclear. Choose a place to borrow that already has the authority and legality of state supervision. This is the best way to ascertain whether the lending agency will implement the rules of borrowing money fairly or not.
Those are some important things that you should not miss when considering choosing the right loan.
Choosing the right loan can be a kind of challenge because many people cannot avoid getting the loan. People can have various reasons to take the loan, after all. Some people usually take the loan because they do not have enough money to fulfill their needs.
There might be a time when people take the loan because they want to use it for business or investment. Various types of loans are available including personal loans. People indeed have to be much more careful when choosing a personal loan because it is considered an unsecured loan. The tips below can be followed to find the right personal loan.
Compare Interest Rates
Because of the need for money, sometimes people can be tempted too easily by the offer from the bank for their loan. They might think that the offer of a 14% loan interest rate per year sounds great enough. Nevertheless, people must not just choose the offer right away especially if they just get information from one party only.
Nowadays, people can find several banks that offer personal loans. The essential first step that people should take when looking for the right loan is by researching personal loan terms and the interest rate offered by several banks. This way, people will be able to make a comparison so they can make a better decision.
Compare Charged Fees
Although interest rate becomes the first important aspect to consider when choosing the right loan, it is not the only thing that people should compare to make sure that they can get the right loan.
The bank will charge fees for the personal loan they take. That is why people must not forget to make a comparison of this aspect as well before making any decision of the personal loan choice. The fees will be varied from the processing fees to the service tax. Paying attention to details is crucial in this circumstance.
Find Repayment Flexibility
Before taking a personal loan, people need to understand that most products of personal loan offered by the banks will come with prepayment charges that can be full or partial one. It means that a small fee must be paid if people want to pay their loan before the tenure ends.
Maybe we can find some banks that do not charge any foreclosures fees but it is not common. Taking this step can be considered if people want to reduce the burden of overall debt due to future interest payment deduction. However, you still have to pay some money for this burden reduction.
Find Affordable EMI
It will be troublesome if people take a personal loan and they find that they cannot make the regular repayments of the loan to make sure that the loan can be closed on time without having to pay penalties.
That is why people need to make sure that they are well-informed about the equated monthly installment or EMI that must be paid on the amount of money they borrow. It will be easier to know EMI by using an EMI calculator after all. The process of choosing the right loan will be easier.
It is true that having a loan can be burdening since you need to spare your salary or income to pay it off gradually. It can take years before you can pay your loan off especially if the amount of money you borrow is big. However, loan can be a great solution for your financial problem.
It can finance the things you want to do or have such as education, business, etc. thus, loan is not always related to something bad. In fact, lots of business owners start their career with support from loan. They can be successful as well even though they have to make effective financial plan.
Things to consider before applying for loan
There are many types of loan you need to learn before applying any of it. Remember that each one of them has different requirement, term, etc. here are things you need to consider in order to choose the right loan that fits your need:
First thing first, find a reason why you need a loan. You need to find solid reason before making any decision. Do you really need to a loan because you need it or want it?
Try other solutions aside from loans to solve your financial problems. However, if loan is your best solution to come up with, it is time to start researching about the right loan to apply.
Since there are many types of loans, such as auto loan, student loan, mortgage loan, small business loan, and many more, you need to identify your own need. What kind of loan you really need because even the same loan may have different terms depending on the lenders.
Each lender has different requirement and terms, as well as interest rates. All of them needs to be taken into consideration because they relate to how you are going to pay it back in the future.
Unsecured loan typically has higher interest rates than secured loan because it doesn’t require any collateral to make the lenders feel safe enough to trust borrowers.
The length of time for repayments needs to be considered as well. You need to consider between the amount of monthly payment you need to spend and the length of it. You don’t want to spend the rest of your life repaying your debt. Choose any possibility you can make as plan to make efficient repayment without stripping down your income.
It is common for people to take on loan to finance their needs such as for purchasing home, financing education, or any general living expenses. There are many types of loans to choose based on individual needs. With that, there are various options available to choose.
The loan market provide various type of loans so borrowers can choose the right one. It is important to do your own homework before applying for any type of loan. You need to know what type of debt obligation that fits for you. Every little factor can affect your finance so being thorough on your research is absolutely necessary.
Breaking down each type of loan
Installment loans are the most common loans preferred by consumers. The lenders give some amounts of money and the borrowers pay it back over time in monthly payment. Example products are student loans, mortgage, personal loan, auto loan, etc. so here are differences of each type of loan:
Student loan tends to be varied for private loans so you will need to dig and compare further. The maximum amount is up to $12,500 annually for undergrad loan. The term length is also varied.
It depends on borrower’s debt and post-grad income. Student loan is categorized into unsecured loan because it doesn’t require collateral. However, the interest rate of student loan is relatively lower than other unsecured loans.
Mortgage loan is considered a big deal because it usually involves big amount of money. It is up to $424,100 for conforming loan. For jumbo loans, it can be over $424,100.
You can consider the term length of mortgage as good or bad because it takes 15 to 30 years. This is categorized into secured loan because your purchase property, house, etc) is the collateral.
Personal loan can be both secured and unsecured loan and it involves no collateral. The term lengths of repayment is varied. It can take up to 10 years. The maximum amount of money is different between secured and unsecured loan so you need further research between financial institutions.
Auto loan has maximum amount of money up to $100,000. The term length around 2 to 10 years. Most auto loan is typically secured. Thus, the lenders will take the vehicle that the borrowers purchased if the borrowers are in default.
Auto loan is very common. People apply for auto loan so that they can purchase vehicle they want for personal or business purpose.
Living in this modern world makes it easier for you to find solution for almost every problem. It also applies to your financial problem. Online loan is one of the most common solution people take to solve their financial problems.
Today, there are already plenty of online lenders to choose from. Therefore, the bank is not the only option you have when it comes to applying for loans. You don’t have to go from one bank to another just to compare which one of them offer the best products.
Benefits of choosing online loan
People borrow money for different reason and purpose. The point is, they want the best solution for their current financial situation. Borrowing online is one of the most efficient solutions and here are the benefits:
The approval is relatively quick to get if you choose online loan. The information is already available on the webpage of the lenders so everything you need to know can be found instantly. You will know how much you can borrow and what requirements that need to be fulfilled without going back and forth physically.
Online lenders usually offer better rates to attract more consumers. That’s why lots of people consider online loan. Of course, every online lender may have different terms and rates.
The good news is that you can compare online lenders in shorter time because you can do it online. Another reason why online lenders offer lower rates is because they work differently from banks. They don’t face the same regulatory cost as banks.
Aside from getting quick approval, online loan also offer easier approval. You may have known that banks as well as credit unions are getting skittish these days. Your credit is often your obstacle from getting the loan you need from them. For those who are still building credit or have been through hard times, online loans can be good alternative to choose because the approval is easier to get.
Another benefit of online loan is most of them are unsecured. It means you don’t have to pledge anything collateral to the lenders. The consequence of being failed in paying back the loan is that your credit score will drop. However, you won’t lose any possession.
Applying for online loan is relatively similar to regular loan. You have to provide personal information and fulfill other necessary requirements. However, the process is relatively quicker and easier. It may take only 15 to 30 minutes to proceed.
Online loan can be great alternative for your financial problem if you wish for quicker and easier process to go through. Of course, applying for loan can be stressful because you need to fill out application and fulfill other requirements before getting any approval. However, those are parts of applying loan.
You need to go through necessary process to get the money you need. However, online loan makes it more bearable because the process itself only takes 15 to 30 minutes. Of course, it is not always sunshine and rainbows as there are also some traps in online loan you need to be aware of.
Things to consider before taking online loan
Online loan sounds so tempting because it is said to provide easier and quicker process. The rates are also relatively better than banks or credit unions. However, you also need to be cautious before taking one online loan because not all lenders can be trusted. Doing research is a must so you can choose the right online loan that work for you.
It is important to search for online loans and make comparisons to find out which one is the best for you. Online loans are also varied. You might end up finding various types of loans that you don’t even understand what they are. Therefore, don’t do anything in a rush.
You don’t want to end up with a high-cost short-term loans that can result in debt spiral. Thus, you need to identify every product of loans and choose what works for you.
You may find payday loan in the process of searching for the right loan. It is a very short-term loan that you need to pay off within a month. If you are unsure you will be able to meet that kind of repayment arrangement then you can choose it.
However, it is best to avoid very short-term loan if you don’t have ability to pay it off on time because the rates are relatively high and the longer you delay your repayment, the higher the amount of money you need to pay.
If online lenders require payment up front, you’d better find another lender. You need to be aware and cautious of advance payment scams. They are quite notorious. Lots of people have fallen victim for this scam. They demand money from you from the beginning but provide nothing in return. Online scams are everywhere so you need to always be cautious.
One of the most important factors in loan is the interest rate. It always comes as the big consideration before making any decision in taking loan. Of course, it is as important as the principal because it affects your financial situation in the future and in the long run. If you choose a loan with extremely high interest rates, you may be end up with deb spiral. It is common to calculate the loan with the interest rates. Borrowers often do that to make sure that the loan and the interest rates work best for them.
Calculating loan interest
You can calculate loan interest through various ways. You can do it with calculator or spreadsheets. Of course, you can do it by hand as well if you want to. Here are things you need to know about calculating loan interest.
- You don’t need to hesitate using technology as it is available to make your life easier. As for calculating loan interest, you can also use technology to get quick answers. Online calculators and spreadsheets are easy to access. It requires quick process so you don’t have to waste your precious time.
- Aside from using technology, it is also great idea to do the math yourself for more detail information. Thus, you will get better understanding. Doing the math yourself allow you to grasp more ideas and clear information you can use to make the right decision. It allows you to understand the numbers more.
- It is important that you know the types of interest in loan world. You need to find correct and trusted information of how interest is charged. It usually depends on the type of the loan and the rules applied by the lenders as well. You need to comprehend everything thoroughly. Some lenders may charge interest rates monthly while some others may charge it annually. Choose the one that works for you.
The bottom line
If you want lesser works to do to calculate loan interest, take advantage of the technology by using online calculators and spreadsheets. They come in easy steps to follow and relatively quick to finish. If you want detailed information, do by hand calculation or make your own spreadsheets. The information you need to proceed by hand calculation include the interest rate, the length of time the loan last for, the principal, and the monthly payment. The simple formula to use is (Interest = Principal x rate x time).
Starting business even with the small one is challenging especially when it comes to its finance. You need to have ability to access capital and receive funding. In business, the most popular ways to receive funding is by taking loans or bringing in investors.
You can choose one of them or do both. However, the relatively easier option is taking loan. The reasons are clear enough because loans require less outside input on how to run your own business. You can do whatever you have to do with your business without other interventions because there is no investors involved.
Choosing the right loans for business
Before securing capital for your business, it is important to decide what type of loans that work for you and your company specifically. Here are the most common loans for business owners to choose:
Short-term loans have due in full, at the end of the agreed-upon term instead of monthly payments. Business owners take this loan usually for short-term needs such as for raising cash, building up inventory, completing small project with quick returns, etc. the amount of this type of loan is relatively below $100,000. This type of loan is more suitable for seasonal business such as retailers.
Long-term loans are one of the most common types of loans preferred by business owners. Large commercial lenders are usually the one that contribute this type of loan. It is commonly used for business expansion, refinancing, acquisition, etc. it is usually repaid in monthly basis with large amounts but lower interest rates compared to short-term loans. You can get them relatively easy if you have established-business or string growth plan to begin with.
Lines of credit are also quite common for business especially the small one. It involves opening a line of credits to allow business owner to access fund. Basically, it is similar to using a credit card. However, it is important to keep in mind that this type of loan has relatively high fees with compound interest.
Most business owners choose this type of loan when they are in critical and urgent situation such as for temporary downturn in income. It is not recommended to take this loan for business expansion.
Choosing the right loan is important to grow business because then you can manage your financial setting better. By taking the right loan, you also have opportunities to make your business bigger and steadier.
When your financial situation is in crisis, loan can be your solution. It is not something uncommon. In fact, lots of people consider it as their go-to solution when they are in need of financial support both for personal or business use. It is also common for people who start business to apply for a loan.
Receiving a loan is not as bad as it sounds. Yes you have responsibilities to pay back the money you borrow along with its interest. However, you can do it without hassle if you take care of everything well.
Of course, loan consists of various types. Thus, it is highly recommended to consider everything before applying any loan. Choose a loan that fits your financial situation. You also need to think further of how you will be able to do the repayment without a miss. Your ability and affordability to pay back should be taken into consideration. Here are some types of loans that you can find:
Personal loan is a loan that every individual can get at almost any bank. It usually involves your credit history. The good thing about this loan is that you can whatever you want with the money. You can use it for your education, vacation, etc. It is also typically unsecured. However, this type of loan usually has high interest rates and the amount of money you can borrow is usually small or not over $5,000.
Mortgage loan can be considered as the opposite of personal loan especially when it comes to the amount of money you can borrow. This is usually used to purchase big things such as house or real estate whether for personal use of property business. This type of loan is usually secured by the property you are buying so if you are default to the repayment, the lenders can take the property as their possession. The interest rate for this type of loan is relatively lower than unsecured and other loans.
Student loan is a solution to finance education. It is common that the interest rates of student loan is relatively reasonable compared to other loans. The good thing is that you can pay the loan back later, not when you are still a full-time college student. You can pay it back later after you graduate. The bad thing is that you will end up paying huge debts after graduating which means you need to find the best job with promising salary.