Need Money? A Loan Could Be The Answer
If you need access to money for business or personal use a loan could be the answer. Read this now to find out what you need to know before you go looking for one.
Some Basic Information For First Time Loan Seekers
There are many reasons why you might need a loan. It could be for a business start-up, expansion or to cover capital costs. It may be to buy a home, a car, to pay for school or some unseen emergency. Regardless the reason, loans provide large sums of cash to borrowers in times of need. If you have never received of applied for a loan the task may seem daunting. The first thing you should do is familiarize yourself with the ins and out of what a loan is and they work so that you can make a good decisions for yourself, your business and your family.
Your credit score is intrinsic to your ability to receive a loan. Credit scores are compiled by many different agencies and basically are a history of your credit worthiness. They include all information about past credit or loan accounts you have had, and information on payments you make, whether you pay on time or not. Higher scores mean easier access to credit and better rates. Lower scores mean limited access to credit, lower rates and possibly even outright rejection. The Catch 22 is that it often takes some form of credit account to get a good credit score, and it’s hard to get a credit card without a good credit score. Knowing your score is important, keeping it up is vital.
Credit Or Loan, What’s The Difference?
A loan is similar to a credit account but has some significant differences. First, instead of a revolving limit that is charged and paid down, the balance of the loan is paid in full to the borrower in advance. Revolving credit means that as the credit balance is paid down money becomes available for use, when the balance on a loan is paid down that money can not be borrowed again. Another difference is that credit can be used at the borrowers discretion for any purpose, at any time, at any merchant where it is accepted. Loans are often given for a specific purpose and can only be used for that purpose.
Yet another way in which loans are different from credit is the use of collateral. Collateral is anything of recognized material value that can be used to secure a loan, credit cards typically do not require collateral. In the case of an auto or home loan the car or house is the collateral. Other forms of collateral can include but are not limited to jewelry, precious metals, stocks, business equipment and future earnings.
For someone trying to establish credit, or those with poor credit, collateral can be the ticket to getting the loan you need. Loans that require collateral are called secured loans. This is because the loan amount, the principle, is guaranteed by the value of the collateral. Loans without collateral are called unsecured loans. Unsecured loans are harder to get but not impossible, the key is having a good credit score and a history of repaying previous debts.
If you can not get a loan because of a low score, no credit history, no collateral or a combination of all three there is still an avenue for you. The Cosigner. A cosigner is someone with good credit who signs for the principal along with you. This basically means the loan is being issued to the cosigner while allowing you to benefit. The downside to this is that your activity on the loan, your repayment, has a direct effect on the cosigners credit report and can damage it if payments are made late or not made at all.
Is A Loan Right For You?
Only you can determine that but with this knowledge you are prepared to shop around. No two loans are identical, no two institutions have the same standards so it is possible to find a loan that is not only available to you,but right for your needs. The next step is to compare the loans available and look for the best terms and lowest rates.