Whether you’re starting a business, buying your first home, or just need a bit of cash to make it through the month, there are dozens of loans options available. Understanding which type of loan best fits your needs can be a daunting task. Here are four of the most common types of bank loans and how they work.
Loans are generally broken down into two main categories: unsecured and secured. An unsecured loan does not require collateral. This is great because less stress is put on consumers, but higher risk is on the bank. These loans are usually short term and for low amounts. Secured loans require collateral that can be taken if the consumer faults or fails to repay the loan. These loans are often high value and long term loans.
Most banks provide some form of personal loans which consumers may use towards an expense such as buying a new TV or paying off a bill. Personal loans are typically unsecured and low in value. Lenders often require a form of identification from the consumer and proof of assets equal to or greater than the loan requested. The approval process only takes a few days, but interest rates are generally high.
#2 Credit Cards
Credit cards are one of the most widely accepted forms of payment, while essentially being a loan. The application process is usually quick and credit lines can vary from a few thousand to endless limits. One major advantage of credit cards is that funds are guaranteed and protected from the lender, this adds a level of protection for consumers. A major downside of credit cards is that interest rates can be high, and continual unpaid balances can rack up major interest fees.
#3 Home Equity Loans
Most home buyers are aware of home equity loans, most commonly known as mortgages. These large, long-term loans are usually secured and require some form of collateral often the property itself. Interest rates can be as low as a single percent, but as principal costs are high even low-interest rates can become huge fines when unpaid.
A similar form of home equity loan is a line of credit. The same general rules apply to lines of credit, however, they allow consumers to borrow more funds after a percentage of the original loan has been repaid.
#4 Small Business Loans
Small business loans are often provided by either the Small Business Administration (SBA) or a local bank. Loan terms vary in both value and length, and interest rates are often flexible. As business loans can range from thousands to millions of dollars, collateral is required. The approval process is strict and obtaining a loan can be difficult.
A loan can often make a life changing difference in a person’s life. With dozens of options to fit your exact needs, taking out a loan should not be ignored. Just be sure to understand the conditions and choose what’s right for you.
A minor amount of debt is something most people deal with. Debt can even be a good thing if the debt is connected to the responsible repayment of a home or auto loan. Excessive personal debt, however, is not positive in any way. A person indebted to thousands upon thousands of dollars in secured and unsecured debt along with tax obligations has an unenviable task, paying off the debt. Paying the debt may prove impossible due to a personal financial situation.
Bankruptcy laws exist to help a person or business currently trapped in an inescapable cave of debt. Being awarded bankruptcy protection is something given with ease. A person must be a true candidate for protection in order for the bankruptcy courts to make a positive judgment.
More than Just Being in Debt
Owing money is not enjoyable, but the situation can often be dealt with. Someone who doesn’t want to deal with the budget-draining burden of paying high-interest credit card debt might be thinking about filing for bankruptcy. The situation, however, might not be dire enough to rise to the level of needing bankruptcy protection.
A number of factors need to be examined before choosing to seek bankruptcy protection. The impact of the debt takes on many forms that contribute to the various factors. Emotional strain and impact on the future are two of those factors.
If paying the debts off within a reasonable time period with a logical repayment plan is impossible, then maybe the debtor really is a candidate for bankruptcy.
Dire Consequences Loom
A debtor may be trying to avoid filing for bankruptcy, but the steps being taken to stay financially afloat might not be working. A car could be on the verge of being repossessed or dire non-payment of tax consequences may be looming. All of these matters are positively serious. Bankruptcy protection potentially brings forth a solution capable of averting personal ruin.
Likely, the most basic of all criteria is debts end up exceeding — far exceeding — both past and future assets. A person with little or no net worth and whose future income prospects look limited is not exactly in a good position to pay off debts. With $10,000 in assets, $25,000 per year in income, and $75,000 in debt, debt that comes with an average interest rate of 19%, the debtor is not exactly poised to effectively address the situation without assistance.
Discussing the Situation
Speaking with a bankruptcy attorney could prove to be a very fruitful time investment. The attorney is sure to look over the situation and provide a reliable professional assessment. The attorney could even make suggestions for alternative strategies. Debt settlement, for example, might be far easier and less impacting thank bankruptcy. Yet, in certain situations, debt settlement might not be appropriate. A professional well-versed in counseling on bankruptcy matters can advise on the legitimacy of a client’s candidacy for bankruptcy.
Filing for bankruptcy may sound ominous, but doing so could be the very best decision a person makes. This is, of course, dependent upon how legitimate a candidate for bankruptcy the person is.
Mobile and online banking have many similarities, but they both offer different options. Mobile banking has been around for years, and online banking is now becoming popular.
Mobile banking is used on your phone to access your bank account. Mobile banking uses two types of transactions to check your finances. These transactions are called a push transaction and a pull transaction.
A pull transaction means that the customer requests the transaction. This may include viewing your balance, transaction history and other activities. A pull transaction is a transaction between the customer and the financial institution. A push transaction is a transaction that the customer receives from the financial institution.
There are various ways to use mobile banking. Mobile banking can be in app or call form. Most financial institutions have an automated system to call to check your financial information.
An automated system can be used on any phone. You can call using a landline or mobile phone. The customer presses specified numbers to get their financial information. The type of financial information that you can get from the automated system varies.
Most financial institutions have a text message system for customers to access their financial information. Text message systems have pull and push transactions. This type of system works on most mobile phones.
If you have an Android device or iPhone, you should be able to get on your financial institution’s website to see your banking information. This varies depending on the type of phone you have, and not all mobile phones have the capability of seeing these webpages. The only downfall is that your information may not be safe since mobile phones don’t have virus and spyware protection.
The last option is to view your banking information using your bank’s app. This varies depending on the bank you have because not every bank has apps for their customers to access their accounts. Not every mobile phone has the option of downloading apps, especially if you have an older mobile phone. The downfall with this option is that you don’t have any spyware protection to prevent hackers from getting your personal information.
Online banking is an option for a user to access their accounts using a computer. The downfall about this option is that your computer may not have protection from viruses, spyware, keyloggers and other programs that could get your personal information. If your computer is protected with an anti-virus program and firewall, it should be safe to use this option, but you do so at your own risk.
This option means that you can see push and pull transactions. With online banking, you can view all of your financial information.
Online and mobile banking has advantages and disadvantages. To use either of these programs, you’ll have to sign up for it and set up your account. You usually can sign up online, but depending on your financial institution, you may have to go to the bank to set up your account.
There are several questions that surround the uses of personal loans. A personal loan is not a payday loan with very high interest rates that must be repaid immediately. There are long-term installment loans available with flexible repayment plans and variable interest rates. Decide if getting a personal loan is the right option for you.
There Are Numerous Uses
People borrow personal loans to fulfill their own personal needs. They use funds to pay for tuition, start a new business or cover a vacation. Some people have emergency needs that include paying off several months of back rent or mortgage to avoid losing the home. Other emergencies include paying medical expenses to get lifesaving treatments. Overall, use personal loans for anything unlike home or student loans that are stricter on the terms.
Secured and Unsecured Loans Are Given
Personal loans are either secured or unsecured. Secured loans require the use of collateral, such as a vehicle or house, that can be seized in case of a default. Unsecured loans do not require collateral, so the risks are higher and result in higher interest payments.
Unsecured loans are suitable for borrowers without major investments, such as students and people with bad credit. Compared to other types of loans, personal loans do not have to include collateral. Secured loans are designed for secure borrowers with stable incomes like homeowners and long-term renters.
The Personal Loan Is Nearly for Everyone
The options for personal loans have increased to include more applicants. More consumers are borrowing credit and getting into debts, particularly student loan debts. This means that more people are developing bad credit, so to stay in business, lenders must meet their standards.
Bad credit personal loans are available, but the terms include high interest rates. Many banks and credit unions only accept loan applications from people with good credit. The process of finding a suitable bad credit loan that will not add more debt is typically longer and more complicated. You have options, but you are still a high-risk candidate until the credit score improves.
Knowing if it’s right to borrow a personal loan means knowing the wide range of options. The loan amount depends on your credit score and employment. Bad credit options are limited but still available. Find personal loans at banks, and go to online lenders for higher approval rates. Overall, personal loans are right to those borrowers who know the choices given to them.
One of the most important factors in your ability to get a loan is your credit score. This number, based upon a number of factors that estimate your creditworthiness for lending institutions, helps banks and credit companies determine how much interest you’ll pay if you’re deemed worthy of getting a loan in the first place. Because this score has so much influence on your finances, it pays to make sure that your credit score is in solid shape. Here are some tips that can help you improve your credit score.
Pay On Time
Your overall credit score is based upon five different factors, and it just so happens that the biggest percentage of the score is related to how well you pay your bills on time. A full 35 percent of a potential borrower’s score is tied to payment history. Keep up with paying your bills so that none of them reaches 30 days past due, and this portion of your credit score will stay high. Make a payment that goes into arrears, and see your credit score plummet. It only takes one late payment to really make a difference. Bankruptcy or bad debt will really kill your score for years to come.
Don’t Use All Of Your Available Credit
Not only should you pay your credit accounts on time each month, you should also avoid getting close to your personal limit. For example, if Visa should feel justified in extending $5,000 of credit to two different people, and one has an outstanding balance of $4,500 that they make the minimum payments on while the other charges $1,500 a month and pays it in full, the latter will see a higher credit score for this component. The ratio of debt outstanding to total credit available accounts for 30 percent of the total FICO score. The debt ratio and the payment history combined account for nearly two-thirds of your FICO score, so keeping these two components in line will definitely help you improve your credit score.
Don’t Close Old Accounts
Closing credit cards down can actually be a negative when it comes to your credit score. It affects two factors. Should you have availability to $20,000 of credit over three cards and owe $3,000 on them, your credit utilization percentage would be 15 percent. Should you close down two of the cards that had $15,000 of available credit, your utilization percentage would grow to 60 percent if you still owe the same $3,000. This is a negative impact on your credit score. Additionally, 15 percent of the total FICO score comes from the age of your accounts. Keeping an older account open can allow you to age your credit history and improve your score over time should you also pay attention to keeping your payments up and your utilization percentage at a reasonable level.
While it might seem that credit scores are confusing, there are definitely some steps that you can take to improve them. The biggest concern that you should have when it comes to credit is paying your bills on time. Also keeping low balances and maintaining some older cards (preferably those without an annual fee) can also help your score improve over time.
A credit report can read like a frightening obituary of a person’s financial history. The credit report may reveal outstanding debts and defaulted payments from past years. While the debt might be old, the problems the log of the debt remain current. In other words, a debt from five years ago could be making it difficult to acquire a new loan and decent interests rates today.
Dealing with old debt is not impossible provided the debtor takes logical and intelligent steps to fix things.
Request a Copy of the Report
Requesting a free copy of a credit report is possible. Anyone can order a copy of his or her credit report from the top reporting agencies once every calendar year. Trying to solve problems on a credit report is difficult when a complete picture of the situation is not revealed. Remembering old debts remains a dubious strategy. Persons who have gone through financial struggles, serious struggles, are not exactly going to find it easy to remember every troubling mark on a credit score.
Aged Debts Disappear
Time definitely works in the favor of someone who has negative marks on a credit report. The report only reflects information within a set time period. Negative information drops off after seven years although negative content related to bankruptcy lasts for 10 years.
What happens when the old debt has not dropped off like it is supposed to? A manual request to dispute and drop the negative content can be made. Take this as another reason why it is so important to request a copy of a credit report. Mistakes and errors may be visible on the report. Only by actually looking at the report can the right steps to fix things be taken.
Contacting the creditor might be necessary. If the creditor has reported a debt with the wrong date, then notifying the creditor might be worth the effort. Through a simple dispute letter, a debtor could lead a creditor to adjust an inaccurate record.
Pay the Debt
Even though a debt may be a few years old, the entity owed the obligation is not going to be closed to accepting payment. A deal might be worked out in which the negative information is removed upon receiving a full or partial payment. Debtors unsure about how to contact those whom money is owed could always work with a legitimate service to make an offer.
This does bring up another vital point. The only company worth working with is a legitimate one. Removing a legitimate debt obligation from a credit score without making any settlements or payments is not exactly possible. How can anyone dispute a debt that is legitimate? Well, the debt can be disputed but it won’t exactly be easily removed.
Do Not Delay
The longer negative information remains on a person’s credit score, the greater the hassles the content might cause. Those who feel they are capable of addressing the ghost of old debt should take steps right away to do so.
When to Apply for a Home Equity Loan
Building equity is one of the most significant financial benefits associated with home ownership. You generally begin establishing equity when you make your purchase as the down payment becomes equity. Equity accumulates with each mortgage payment you make as well as with property value appreciation. As a homeowner, you may keep a close eye on your equity growth, and you may take pride in watching equity increase over time. At some point, many homeowners wonder if they should tap into their equity to achieve specific goals. After all, this can be a large sum of money, and you may have various plans for its use. Before you apply for a home equity loan, consider if now is the ideal time to do so.
When You Have Sufficient Equity
You may have a substantial amount of equity available in your home, but you may not have enough to access a sizable amount of money. Purchase loans may allow you to finance up to 95 percent or more of your home’s value, but refinance loans are different. Most lenders require homeowners to keep a significant amount of equity in the home when refinancing. With this in mind, it is uncommon to find a refinance or equity loan for more than 75 or 80 percent of the current value of the home. Determine the home’s current value, and multiply this figure by 75 or 80 percent. Then, subtract the current lien balances. The remaining balance is the amount you can access through a home equity loan, if you qualify for the loan.
When You Will Benefit Financially
Even if you have sufficient equity available in the home, it may not always be advantageous to use these funds. Equity is a financial asset, and it is wise to only use it to benefit you in a financial way. For example, renovating the house with equity can build additional equity. This benefits your net worth. On the other hand, using the equity to pay for the kids’ education or to take a once in a lifetime trip may sound like good plans. However, they do nothing to affect your net worth. By using the funds for these purposes, you are decreasing your net worth substantially. There are other ways to fund a child’s education or to pay for a great vacation.
When Your Budget Can Support It
A home equity loan is a long-term debt that may be in place for several decades. It is critical that you review your current budget to ensure that you can afford the new loan payment. More than that, it is also important to consider how this debt will impact your long-term financial goals. In many cases, the addition of a new debt means that you will not be able to save as much money or pay off credit card debt as quickly. Ensure that the financial benefits that you enjoy from the loan are worth the negative impact that the new debt will have on your budget.
Equity can be a considerable financial asset, and a home equity loan allows you to re-position or access that asset. Take time to thoroughly review each of these points to make a wise decision about how and when to use your equity.
Many years ago homeowners could borrow 100 percent of the equity in their home. In today’s mortgage climate, banks limit the amount of money homeowners can borrow from their home equity. Many mortgage lenders now limit home equity loans to 80 or 90 percent of the total equity in the home. The total amount a bank will lend a borrower on home equity loans and home equity lines-of-credit depends on the borrower’s credit history and score. Banks also use a borrower’s credit history to determine interest rates.
Reasons Borrowers Use Home Equity Loans
Many homeowners use home equity loans and HELOCs to consolidate their debts or pay for any major expenses. Borrowers use the money to pay for their child’s education, remodel their homes, pay for a wedding or supplement their retirement incomes. However, home improvement and renovations are by far the number one reason why borrowers take out home equity loans. The good news is that many people use home equity loans to pay for what they need and not necessarily what they want.
Home Equity Loans- Sensible Borrowing Option?
Equity in a home represents a valuable asset. A home equity loan or line of credit usually offers low-interest rates and the ability to deduct that interest from a homeowner’s taxes. The ability to obtain a home equity loan also represents additional borrowing power in the event of an emergency. Home equity loans make the most sense when borrows can roll all of their high-interest debt into one loan with lower interest rates and one low monthly payment.
Finding the Best Home Equity Loans
Borrowers who want or need to tap into their home’s equity should follow a couple of tips that can help them save thousands of dollars in interest and fees. The first tip is to treat their credit scores with care. Borrowers must ensure their credit reports are accurate and reflect the correct information, such as collection accounts or judgments. Borrowers must shop around for home equity loans and inquire with multiple mortgage lenders. Local banks and credit unions usually offer the best deals on home equity loans.
The key to successfully obtaining a home equity loan is to make sure the financing makes sense. Too many homeowners take out home equity loans for all the wrong reasons. When they do, borrowers put their homes at risk by obtaining home equity loans they do not need, especially if there is an existing mortgage on their homes.
One of the big problems with investing in IPOs is that investors buy in based on their emotions and their hope that the company will be a huge success for them.
Blinded by this, they often ignore the actual price they’re paying.
Statistics back this up, as an average IPO will gain
18 percent on its first day of trading, only to perform worse than other small-company stocks for the next several years. It’s often best to wait for about 30 to
45 days instead of getting in on day one.
The average return on IPOs fluctuates quite a bit from year to year. In 2011, the
average total return was negative 9.8 percent. For 2012, it jumped into the plus column at 20.5 percent before increasing to a staggering 40.8 percent in 2013. It fell
back down to 21 percent in 2014 and then dropped all the way to negative 2.1 percent in 2015.
The lesson: it’s hard to predict whether an IPO will be successful or not, making it crucial that you do your homework.
IPOs Tend to Be Younger Companies
Since IPOs are often younger companies, the IPO
you choose may have a limited track record or an inexperienced management team that is still learning the ropes. It also may not have built up a strong customer base
yet. These are all issues for companies at one point or another, but you are taking more of a risk when you invest in a company that hasn’t proven its ability to stay
in business for the long haul.
Just because it’s riskier doesn’t mean that investing in an IPO is a bad move. You may make a great trade. For the best chance at success, understand the risks and
don’t let hype convince you to pay more for the IPO than you should.