Getting a suitable loan is very important when you’re looking to borrow money. Before you even get swamped with the finer details, you should make sure you’re getting the right loan that will pay you what you need and won’t put your financial stability in jeopardy. It’s best to know beforehand that you can pay off the loan before you take it.
Keeping that in mind, we’ve written this short guide on finding the loans suitable for you. We’ve covered several of the important factors related to getting a loan, so you can read about each one and decide which terms are perfect for you. If you need fast access to cash, consider checking out CreditNinja’s payday loan alternatives.
Let’s start with the basic criteria that every loan should fulfill. If your loan falls outside these basic criteria, you may want to reconsider doing business with that personal loan provider company. Even if you’re desperate, taking out a loan with unfavorable terms is worse for your finances in the long term. First, you should establish that your chosen lender has standards. It doesn’t matter which loans you get if your lender isn’t appropriate. A lender who has no standards is a red flag since they’ll take money from everybody, instead, you want a lender that processes your information and decides that you’re good enough to work with. This means they’ll ask to see your credit history, so getting more favorable loans is easier if your credit score is in good shape.
Next, check how they apply administration fees. Setting up and delivering a loan service costs a little, so lenders factor this into your borrowed amount. Legitimate lenders will deduct this from your borrowed amount, they won’t ask you to send them any money directly until you start making scheduled loan repayments. Some scams do, however, so you should avoid lenders that seem desperate for your financial information. From there, you may need to do other things to have a chance at getting the loan. For example, business loans will require a business plan (and experience), evidence of cash flow, and sometimes a personal guarantee. For personal loans, you can be accepted with a good credit history and collateral, which we have explained below.
In the context of loans, security is how the lender can be confident that you’re going to pay your debt. There are many tools that lenders can use to determine how secure a loan is, like a borrower’s credit score, for example. From there, the loans they offer can either be secured or unsecured. Secured loans are where the lender doesn’t trust in your ability to pay back the loan or the loan is specifically tied to an asset, like a property, a vehicle, or heavy machinery. In those cases, the lender reserves the right to seize certain assets if you stop making repayments or otherwise break the deal you’ve made with the lender.
In loans that aren’t intrinsically tied to assets, like home equity loans or auto loans, then you’ll have to put the collateral up yourself. The resale value of your collateral asset is typically how much they’ll let you borrow, so you can borrow more by risking property than risking your car. Needless to say, you should only enter into these agreements if you’re 100% certain you can make your repayments. Unsecured loans don’t come with that risk, instead, there is no collateral and the lender has no right to seize property unless you’re subject to a collections process. Even then, there are many safety nets and bankruptcy procedures in place should you default on them. This way, you can make a successful rebound from bankruptcy. You can get unsecured loans if the lender trusts you to pay the loan back. If it’s a business loan, you’ll need to demonstrate profitability.
Loans can have terms and monthly payments that are fixed, meaning that there are no flexibility or renegotiation opportunities should your financial circumstances change. If you need more time, or you want to lessen how much you’re paying each month, then you may want to consider a flexible loan instead. These are more common in the world of business loans than personal financing, which makes sense since the financial circumstances surrounding businesses fluctuate as they grow. Some loans can be used for debt consolidation, where you can take multiple outstanding debts and combine them. In doing this, you can change the term and the monthly repayment amount, affording you some flexibility in how you pay back the loan.