Almost everyone will apply for some kind of loan at some point in their lives. Cash payments for goods and services are not only becoming less common, but they are also very inconvenient. Today, credit is a way of life, and as more and more people shop online, plastic is the only currency accepted everywhere.
The credit card is the most basic type of loan. Credit card companies make money every month that you have a balance, because they bet that you won't pay off the balance every month.
Some loans are smart from a business point of view. Why would someone pay $300,000 for a new house when they could get a Home Loan, pay $1,000 a month, and deduct the interest from their taxes? That $300,000 could be put to work in other ways, and you might even be able to make more money with it than you pay for the house. And if you do things at the right time, your house will keep getting more and more valuable.
There are also times when many people's finances just don't look good. You just don't have enough money to cover your living costs because of an unexpected cost. There are many types of loans, both secured and unsecured, that can be used in this situation.
You might just need some quick cash to get you through the holidays and plan to pay back the loan in your next few paychecks. There are a lot of places online and off that offer short-term Payday Loans. Some will put up to $1,500 in your bank account within 24 hours, even if they don't check your credit.
Student loans, auto loans, loans for small businesses, personal loans, home loans, second mortgages, payday loans, government loans, loans for people with bad credit, and loans to pay off other loans are all available.
How much are you going to pay back on your loan? Most of the time, the answer to that question will depend on your credit history.
Your credit history will determine whether or not you get the loan and how much it will cost.
It's never too early to start building credit, and a credit card is the best way to do this. If you can't get a credit card because you don't have a history, you can always apply for a secured credit card or line of credit to build your history. You can borrow against the $500 or $1,000 you put down. Make sure the place you're applying to reports to the major credit bureaus, use the line of credit and pay your bills on time, and voila! You have a credit history. There's nothing wrong with carrying a balance from month to month as long as you pay at least the minimum or a little more and pay it on time. Creditors like to think that they can make money from you.
What Lenders Want to See
Even though different institutions have different requirements, there are some things that can be said about how they decide if someone is creditworthy. Don't be confused: creditors are in business to make money. If your credit isn't perfect, you might still be able to get the loan, but you'll have to pay more for it.
After getting your application, a lender will get your credit report from one of the three major credit bureaus, Equifax, Trans Union, or Experian. This is a record of your past credit. The potential lender will then decide if you will get the loan and how much they will charge you for it based on your income, the amount of money in your checking and savings accounts, the assets you own, how long you have been at your current job and where you live, how much you owe other creditors, and how quickly you pay your bills.
It won't be easy to get a loan if you have a history of late payments, bankruptcy, repossessions, legal judgement liens, or your account has been turned over to a collection agency. Still, most creditors know that life happens, and things like getting sick, hurt, or losing your job don't always hurt your creditworthiness.
When things go from bad to worse
Talk to your loan officer if any of these unplanned events happen while you are making payments on a loan or loans. Most loan companies think it's in their best interest to work with the borrower, so they'll often make the arrangements that will make it easier for you to pay back your loan. Just remember that they want their money, and the last thing they want is for you to not pay back your loan or, heaven forbid, go bankrupt.
