Be it personal or professional life, financial challenges are hard to keep at bay for a long time. Resultantly, people turn to lenders and opt for various types of loans.
Depending on the kind of loan, borrowers have to follow different requirements. For example, a payday lender will hardly entertain your credit score and your loan application will be approved even if your credit history is on flimsy grounds. But this does not stand true for a personal lender.
However, there are certain features that are found in every loan, regardless of its type. So whether you are looking for a short term loan with bad credit or long term loan, the following attributes are going to be common everywhere:
A loan agreement is the spine of all the loans. In layman’s terms, it is a document that ensures protection to the involved parties and contains all the essential information related to the loan. Once you sign the dotted line in the agreement, you can’t back off from the enshrined clauses and conditions.
It is very important for a borrower to ward off all doubts before putting his signature on this all-important paper.
Being an outsider, you may have a hard time interpreting “between the lines” stuff, more so, if you happen to lend money for the first time. In all likelihood, your lender will provide the concrete answers to your questions. If not, you may take the help of a loan officer.
The loan application is another common characteristic shared by all types of loans. Using this medium, a borrower reveals various insights about his identity and income to the respective lender. Not to mention the loan amount. Henceforth, the lender will either reject or approve your loan application based on the provided insights.
Since the rejection and approval of loan greatly hinges on the loan application, it would be wise to exploit all the resources before proceeding with this step. In this regard, a loan calculator can win the day for you. This is an amazing tool that scientifically spells out how much you can afford to pay every month.
Remember, all the loan applications are not the same. They vary depending on the kind of loan you are aiming for.
Apart from a few negligible exceptions, a borrower has to repay the loan according to a pre-decided loan term. As a borrower, you will be liable to pay either a fixed or fluctuating interest rate.
If you are opting for a payday loan, the loan term can be as short as one week. On the other hand, a traditional bank loan can last from 1 to 25 years. In case a borrower fails to repay the borrowed amount on the due date, the lender holds the right to penalize him.
Talking about secured loans, lenders ask applicants to put something as collateral. But as soon as the period of maturity comes to a close, a lender can’t retain your asset anymore.
Keeping this requirement in mind, it is important for you to thoroughly evaluate your financial footing regarding whether you are well-equipped to regularly keep up with loan payments or not. It is worth reiterating that any lapses from your side will lead you towards a heavy fine.
Lenders charge a particular interest on the total amount. Needless to say, lending money comes up with a significant amount of risk and the interest-rate works as a compensation for that. The lending party has to take multiple factors, such as credit history, loan amount, loan type, income, loan period, and so on, into consideration before concluding what interest-rate should go with you.
The equation is very simple here; a robust monetary standing will make you a sought-after applicant and earn you cheaper rates. Since the credit score is instrumental in this process, make sure your credit report is free from all the human and mechanical glitches.
Remember, all lenders don’t subscribe to a universal hard and fast rule to establish the interest-rate. For example, if one lender gives more weight to a stable income, the other loan provider may put more emphasis on the debt ratio. The point being, you have bright chances to come across competitive rates by shopping around. In fact, getting more than 5 quotes is equivalent to saving 3000 dollars.
At the same time, there are elements that layout of your scope but play an equally critical role to set up the loan costs. Inflation and demand and supply, to name a few of them.
Lenders give great importance to documents. So much so, many a time, loan applications are rejected only because the borrowing party lags behind in paperwork. Once again, only the loan type can provide you the complete picture in terms of which documents you need to submit.
For example, typically, a personal lender will make sure that you show up with identity proof, permanent address, bank statement, income proof, and suchlike. But the documents will differ if you are seeking a business loan.
Arguably, fast cash loans require you to indulge in the minimum paperwork. Still, these lenders don’t approve loans until you are on top of the basic documentation. All said and done, whatever the loan type may be, there is no way you can get away with this formality. Because it minimizes the risk factor for the lending party.
Don’t assume that lenders will approve your loan immediately after the submission of a loan application. They will assess your documents first and then make their mind whether the loan should be sanctioned to you or not.
More documents mean that the lender will consume more time to verify them and therefore the approval can be delayed. In some cases, lenders keep you on standby for about one week. That said, payday loans are a rare exception. They can be approved in a couple of hours chiefly because the lenders don’t have a plethora of papers to authenticate.
For a variety of reasons, it is inconvenient for lenders to send you the amount in cash. Therefore, the loan is always disbursed to your bank account. If the client does not hold a bank account, he will have to open it up real quick. Traditional lenders have a tendency to send the money in small installments rather than in a lump sum amount.
Generally, we see people debating about what makes one loan type different from another. But it is also very important to identify the similarities between them. Irrespective of which loan or lender you may get hooked up with, you are bound to come across the above features for sure.