Choosing a Loan That’s Really Right For You
When it comes to choosing loans, choices are many and in fact choosing can be a bitconfusing. One of the things you should know before choosing a loan is that loans are categorized according to types. Different types of loans are designed to match the specific financial needs of borrowers. Each loan type presents different options for you. Let’s consider the basic points you should know about loans available in the market.
Secured Loans and Unsecured Loans
Secured loans are ideal for bigger financial projects. These loans can use property, business equipment, cars, mortgages etc as collateral. In case of default, the lender has the right to foreclose the property or take possession of the collateral submitted. For this reason, secured loans are also granted for those with less-than-perfect credit scores. The collateral they submit serves as protection for the lender in case the borrower fails to complete the repayment on his loan.
Take note that you are putting your home or your property on the line when you obtain a secured loan. To ensure that you will not lose your property, utmost care must be taken on keeping up with your payment obligations. Despite the risks, many borrowers still prefer to apply for a secured loan because it gives more flexibility, greater approval rates and in many cases (depending on the collateral) more loan options.
On the other hand, unsecured loans do not require any form of security to be submitted. Unsecured loan lenders however may require their applicants to have an excellent credit rating to be approved. If you have a high credit score, you may have no problem getting an approval for an unsecured loan.
Fixed Rate and Variable Rate Loans
Loans can also be categorized based on the interest rates they offer. Fixed-rate loans generally are slightly higher than variable rate loans. Still, a fixed-rate loan will give you the assurance that the interest rate of your loan will not change regardless of the Prime Rate in the market. With regards to variable-rate loans, the interest rates may start low but is subject to change depending on the Index Rate.
If you’re thinking of getting a long-term loan, it is recommended to look for a fixed-rate loan with reasonable charge. This way, you know exactly how much your monthly payment would be for the entire duration of your loan’s term. Settling with an adjustable rate loan because of its low interest rate can mislead you. You might be surprised that in the middle of your loan’s term, the interest rate could change or soar.
Guaranteed Approval Loans
What about guaranteed approval loans? These loans are created to cater those with bad credit problems. They are also called cash advance loans, or payday loans. These loans are guaranteed approval as long as you have a job and generally make about $1200 a month. If you’re in need of a loan immediately, a guaranteed approval loan can help you. Take note however, that instant approval loans or bad credit loans are usually accompanied by high interest rates. If it is possible for you to work on improving your credit first before securing a loan, then that should be your first move.
Irish Taylor is a bussiness loan consultant with Startup Business Loans and has been providing consumers and business owners with startup business financing since 1992. For years she has helped people with credit and loan problems especially pertaining to business start up, SBA loans and Unsecured loans.
Copyright 2008.
Related Article: Finding The Right Start-up Loan For Your Business Needs
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