BORROWING money today is more of a necessity than anything else. Because of the high cost of living, there is always the possibility that you will face some kind of financial problem that will leave you no other recourse but to go to a MONEY LENDER. However, applying for a loan is something that you should first study very carefully. Here are some tips that you might find helpful when borrowing money.
Borrow only what you need
Always remember to borrow as little as possible or borrow only an amount that suffices your expense need. Never be tempted to borrow more than you need or the repayments may put you in more hot waters.
Carefully select the financial institution
Make sure that the finance institution you are going to apply a cash loan is legit and fully registered. Choose several of these and compare their loan packages to be sure that you will be getting the best deal.
Borrow only to cover specific and necessary expenses
Borrowing to cover educational expenses, home repair and medical procedures are all valid reasons to be in debt. However, never borrow money to pay off luxury items, bills, expensive holiday trips, and more importantly other debts. By doing this, you will only be putting yourself in more financial trouble.
Plan Ahead on How to Pay Back the Loan
If you really need to borrow, plan ahead on how to pay for the loan. Organize and study carefully your income and expense situation so you can determine where to cut some of your expenses to pay off the loan. Also consider the interest and other loan fees prior to making a final decision on the loan.
Get Loan Insurance
This may be an extra expense when you apply for a loan but getting loan insurance is more of an investment than an expense. If you are borrowing a sizable amount, it would be best to get loan insurance because in the event of a default, there is something for you to depend on. However, make sure to read the fine print of the insurance prior to getting one.
Managing your debt is an integral part of an individual’s personal finance. Ideally, having no debt would be the best thing that can happen to you. But we don’t live in an ideal society and like most families we incur debt. For instance, it would be foolish to buy a car in cash or a real estate property without mortgaging it.
We set aside money for education but we still end up BORROWING money just to cover the deficit of our educational expense. Incurring debt is sometimes necessary and at times desirable especially for things like education. The catch here is to know how to borrow money with a low interest rate for a high end investment.
Debt Means Using Other People’s Money
Incurring debt simply means that you are purchasing things using other people’s money. A classic example of this is the use of a CREDIT card where you purchase things and pay for it at a more convenient time. Taking out a PERSONAL LOAN has the same principle. In return for using money from a MONEY LENDER, the latter is entitled to be paid with interest.
No Such Thing as 0% Rate
When people loan you money, you can be sure it’s never interest free. It just seems that way especially if you use a credit card to purchase the said items. They usually say the cost of the item is interest free but the interest itself is already included in the price.
Debt is never bad; you only need to understand it
Personal debt comes in various forms. There is the Property mortgage, a long term loan that may take 10 to 25 years to finish; home equity loan and car loan considered as intermediate-term loan which last about 5 years and there is the short term like those incurred by credit card or personal loans taken from any financial institution.
Remember that the longer the term of the loan is, the lower its interest rate is; but in the same scenario you will be paying more for a long term loan especially if the interest on the amount is compounded monthly.
When you apply for a loan, lending institutions will initially analyze your credit score and credit history. This is because credit score will show your credit pattern with focusing on more recent credit transactions that you’ve made.
There are actually several factors that affect your credit score and history and these are first, your diligence in paying your credit liabilities on time because delinquent payments can have a negative impact on your credit standing.
Second, keeping low balances on credit card, revolving credits and other personal loans; Third, Not applying for new credit accounts and fourth paying off your debt instead of moving it around will raise the standing of your credit score.
Reliability on paying your credit liability on time is an important factor in raising your credit score because paying your credit liabilities diligently shows that you are responsible in keeping your debt responsibilities at a very high standard. For money lenders, this is a good gauge to see whether you can be trusted to pay back on time the amount of money they’re going to lend you.
You’re Credit Utilization Ratio
Your Credit utilization ratio is another factor that any financial institution would look at. The ratio would normally be based on your credit card usage and this is done by dividing the total balance of your credit card against your total available credit limit. Lenders would like to see at least 30% or less result.
If the result is way below the 30% limit then you can be considered as one with a very good credit standing which would be a plus for your loan application. Low credit utilization also shows that you are using your credit way below the maximum limit which is good because the less you use your credit card, the better.
Two other factors that can also help lift up your credit standing are paying off your current debt to zero out or at least lower your credit card liabilities and second, is to become an authorized user of another individual’s credit account (as long the principal user also uses his credit card with diligence and responsibly).
Many small businesses and individuals who require small to medium size loans are now using online money lender for their financial needs. Referred to alternative lenders, their popularity in providing small to medium scale financial help is getting higher.
Online lenders are considered today as the wave of the future lending because of their swift and immediate approval of financial assistance to small businesses and individuals. But like any other lending institutions, online lenders have their own advantages and disadvantages when it comes to lending out money.
Benefits of Online Loans
Admittedly, BORROWING online can save an individual a lot of time. All you have to do is surf the internet for loan websites and immediately get a comparative offer of various lenders. If you finally opt for one, all you need is to apply, send the necessary requirement via e-mail and just wait for the response which usually only takes a day. Aside from the very short processing loan period, online lenders are open 24 hours a day 7 days a week so you can apply any time you want.
Applying with several traditional lenders will oblige you to submit a credit background of yourself which can be detrimental to your credit ratings. With online lenders, you only need to submit one and that is with the one that you have chosen. Lastly, unlike banks, online lenders are not particular with the individuals and businesses that apply with them.
Disadvantages of Online Loans
Online lenders one disadvantage is their interest rates. They are quite high when it comes to the interest that they charge. There is also a chance that online lender might just suddenly go out of business and if this happen might create some problems with their borrowers. As earlier advised, there is a need for the borrower to make sure that you opt to go with a highly established and solid online lender and you can do this by making a thorough study of the reviews and if possible interview the various clients that have done business with the said online financial company.
It is a common dilemma for everyone to find themselves strapped for cash coming from different reasons like an emergency happened, spending on a whim or just wanting to buy that new Lamborghini, no matter what income bracket they belong to. Some resolve to taking portions of their savings to get back on track while others opt to apply for a personal loan that may help close the budget gap.
But what is a personal loan?
Personal loans are known as “unsecured” debt because they are not backed by collateral unlike other types of loans. With this, lenders or credit institution will use as a basis the credit score to determine a person’s ability to repay the loan with added interest rate out from the applicant’s personal income. Options for repayment can be through lump-sum or fixed amount installments over a fixed term.
This may sound achievable especially when one is earning above minimum wage but remember that personal loan must be settled in a fixed amount of time and rate otherwise extra fees might incur or worst the lender could take the person to court and sue for breaching an agreement. The keyword here is paying “on time” because being too early or late both has its cons.
The applicant’s good credit score is the only ticket to getting that big YES from a list of licensed moneylenders. A credit score is based on, among other things, a person’s past credit history and is numerically represented between 300 and 850.
This means that the higher the number (or score), the more financially trustworthy a person is considered to be not to mention the advantage of saving on interest rates. However, for some borrowers with credit issues, a personal loan may carry high-interest rates with them. Deemed as a downside, because having a high-interest rate could lead to large monthly payments which can become unaffordable and will affect greatly one’s credit score in case late or missed payments will happen.
Finally, having all these basic concepts in mind, an applicant should just be mindful of one thing and that is to practice good credit habits to make sure that the credit score is the best it can be.
Hard money lenders are new breed of lending entities. They are a far cry from the conventional banking and other financial institutions that offers loans to individuals and businessmen. Hard money lenders are mostly a group of investors or a single individual whose business is to lend money to prospective borrower with the condition that he (the borrower) covers the loan with a high valued property.
A conventional MONEY LENDER such as a bank would usually be interested in the borrower’s CREDIT score including his capacity to pay the loan. Conventional lender is also more interested in the credit history of the loan applicant. Also the approval for a loan by a traditional lending institution is usually a very slow process.
How Hard Money Lenders Differ
BORROWING money from a hard money lender on the other hand is totally different. Instead of taking into consideration the credit score, history and capacity to pay by a loan applicant, their major concern in approving the loan is based solely on the value of the collateral that the borrower will offer to secure the loan.
The money provided by hard money lenders are referred to as hard money. This is because the condition provided in the loan is very strict and hardly flexible. Aside from this the loan provided by hard money lenders will only be worth about 70% of the value of the property that is securing the loan.
The main agenda of hard money lenders is not to be sure of whether the loan can be repaid or not but more on whether the value of the collateral left by the borrower would prove to be profitable for them.
The Advantages of Using Hard Money
There are mainly two major reasons why some borrower would prefer to borrow from hard money lenders. Since hard money lenders are not a financial institution and covered by strict corporate laws, they can release the required loan at a much faster time.
The other reason is that as long as the borrower can secure the loan at high value property with the help of the moneylender review , negotiating for the loan can also be quite profitable for the loan applicant.