Day: May 13, 2020

Important Things to Know About Personal Loans

In the past, people that get short of cash turn to their relatives or friends for assistance. However, the situation can be embarrassing when your relative or friend chastise you for asking to borrow. Nowadays, people that are short of cash turn to personal loans for quick financing. Approval is quick for the qualified borrower since you can get cash a few hours after the loan application approval. The interest rate might be higher than the norm, but it is one good way of solving your financial issues.

Here are the salient points that you must know before applying for a personal loan.

Do Not Require Collateral

One attractive feature of a personal loan is that it does not require collateral. When you need money, but you do not have anything of value to offer as security, a personal loan is the best option. You do not have to own a car or a house to get credit. However, because the loan is unsecured, lenders tend to charge high-interest rates.

Because the lender relies on your honesty and willingness to repay what you borrowed, most of them require you to have a good credit standing or score. Your credit rating will show the lenders that you are responsible enough to honor your commitments and financial obligation.

Before sending your loan application, do your research and make a comparison of several lending institutions in terms of the maximum loan amount, requirements, repayment plan, and interest rates. By doing this, you can find a lender that offers the best deals for you.

No Cosigner

Firms that grant personal loans do not require you to have someone to sign the contract as a cosigner. No one would know that you have applied for credit. The high-interest rate is the lender’s way to minimize the loss in case you fail to repay your loan.

Have Fixed-Interest

Personal loans usually have fixed interest, which means that the interest stays the same throughout the life of the loan regardless of the current bank rates. One advantage of paying fixed interest is that you know how much to allocate for your loan payment every month. Another advantage is that when bank rates go up, your loan payment remains the same.


Personal loans are a quick option when you are on a tight fix, but some lenders charge fees. Read well the terms and conditions before signing up. Some financing companies charge as high as 8% of the loan amount for processing alone. Check for penalties for advanced or delayed payments. When you add up the fees, you can come up with a considerable amount of money.

To reduce costs of fees, compare the amount that the lender charges for processing your application. Make sure that there is no penalty in paying your debt in advance. Most creditors prefer that you follow the repayment schedule diligently.

Repayment Terms

Repayment terms among lending companies vary. If you opt for a short term loan, you will pay a big amount, but in the long run, you will be paying less interest. A long term repayment would allow you to pay a less monthly payment, but when you sum up the interest you paid, the amount is far bigger than what you paid for a short-term loan.

Some lenders would not allow you to make an advance payment. If you think you would be free from debt, check first if there is a penalty and how much.

You Can Borrow More

Many people think that personal loans are only for borrowers that need a small amount of money. However, you can borrow more than you think depending on your credit score. Some lenders can grant you $50,000 maximum if you have an excellent credit score and a low debt-income ratio. You would also enjoy low interest and easy repayment schemes.

Free Use

When you apply for a loan, most banks and lending institutions would ask you the purpose of the loan, which you will not experience when taking a personal loan.

However, using the money for unnecessary things or a luxurious lifestyle is not a good way to spend what you borrowed. Why not use it to pay off old debt, to survive while in between jobs, or to have your house or car repair? Dong these things will put on more sense on why you borrowed money.

Make sure that when you use the money to pay for old loans, the cost of the new loan will be less than the old loan. If the new debt costs more, it will be better to keep paying the old debt that getting a new one to pay for it.

Getting a personal loan is fast and easy but may cost more than a traditional loan. Make sure that the money that you borrowed will be put into good use to commensurate for the high-interest rate that you must pay.

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How to Make the Most of Your Small Business Loan?

Have you just received a note or a text message that the bank or finance company has approved your small business loan? You must congratulate yourself. Many people that applied for such a loan were not as lucky as you are to get approval.

With the loan that you got, you do not have the cash you need to reach your business goals. You now have the financial capability to make drastic changes that can bring in more revenue for your business. Perhaps, you can now buy the latest machine that you are sure to triple production or open a new branch in a strategic location. Whatever you wish to do is made possible by the new financing that you got.

If you want to make the most of your loan, put your money where you planned to place it as you state in the business proposal you have attached to your loan application.

However, the thought of having so much cash sitting in your bank account soon can give you a feeling of giddiness. Lots of thoughts are running in your head of the possible ways that your newly acquired capital can make your business grow. Here are some ways in which you can put into proper and profitable use your business loan and not spend it over trivial things.

Deposit the Money in a Separate Account

If you intend to use the money from your loan to expand and grow your business, depositing it in a different account rather than in your existing checking account will prevent you from spending part of it on unnecessary purchases.

Since transferring money from one account to another can be a hassle, you would end up spending the money in your checking account, which is convenient for you while keeping the money in your other account untouched. Make sure to transfer funds to your checking account for necessary purchases and expenditures.

Make Automatic Loan Payments

Make sure that you pay your loan promptly and you can only do this by setting up an automatic loan payment from the money that you deposited in your separate account. Most banks and lending companies have automatic repayment feature. Schedule the automatic debit one to two days before your due date.

Records would show that you have always been prompt in your loan repayment. The bank would be happy to lend you money again. Besides, you would have a good credit score, which you must enhance so that you can quickly get approval if you apply for another loan. Automatic repayments would also save you from the inconvenience of having to drive to the bank to personally make a payment.

When you set up an automatic debit payment, you have less to worry about regarding your loan, as long as there is money in your bank account. Some banks offer better terms such as lower interest rates and easy repayment schemes for borrowers that pay through an automated debit system.

Plan Your Budget and Cut Costs

A considerable amount of money in your bank account is not enough reason to be confident about the growth of your business. Continue planning a sound budget and reduce costs as much as possible. You must always plan for the future. Remember that careless spending can deplete your financial resources. You do not know when emergencies would happen, but if you have some savings, you could easily face these problems.

Having enough funds to finance your business does not mean that you are now on your way up. Prepare for challenges and opportunities in the future. Manage your loans well and refinance if possible to reduce the cost of your loan. Finding the least costly way of running your business will help you maintain cash flow.

Check Your Finances Regularly

Allocate a day in a week to sit down and check the income and invoices. If you have a product that does not sell well, you can stop restocking until everything has been sold out while increasing the inventory of items that are in demand. Foresight is important for the success of your business.

Do Not Hide From Debts

If your business is experiencing difficulties and you cannot meet your financial obligations, visit the bank or the financial institution where you got the loan and discuss your situation. Do not wait for the lenders to send you a demand letter or take you to court because this can cost you more in terms of finances and reputation. Your honesty would pay off because some lenders would offer you easy payment terms until your business is stable again. Most importantly, you would be able to apply for another loan when the need arises.

A small business loan can help you grow your business and achieve your business goals. But, if you do not know how to make the most of the opportunity, you might find yourself in a worse situation than before you had the loan.

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