In every person’s life, there is a moment when they need money and need them fast. You may need money to buy a new house, a car, pay for your college by taking out a student loan, or you may just need quick money to “survive” till the end of the month. You can check lender comparison sites like Credible for options available to you.
The easiest way to get some cash without having to bother family or friends is to take a loan. But there are some things you should know before going to the bank.
Here is everything you need to know about loans and when is the right time to borrow money.
Types of loans
All loans are not equal. Before borrowing money, you need to decide which type of loan is right for you.
These are the types of loans available:
- Unsecured personal loans – with these loans you don’t put collateral like your home or car. They are used for everything, from wedding expenses to vacations.
- Secured personal loans – for these loans you need to offer some type of collateral. They come with lower rates than unsecured loans.
- Payday loans – short term and high-cost loans. You have about 30 days to repay these loans and these are $500 or less. Be careful if you want to take a payday loan since their annual percentage rates are about 400%.
- Title loans – these loans are best when you have no other option. If you own a car you may be able to take a car title loan. It would be about 30% to 50% of your car’s value. If you don’t pay this loan back, your vehicle might be repossessed.
- Pawn shop loans – this is a fast way to get money. Take an item of value, pawn it, get the money you need and pay them back to get your item back. It is easy to do, but watch out on the high-interest rates.
- Payday alternative loans – you can get a larger amount of money with these loans, up to $1000. They have longer repayment terms, up to six months. Watch out for membership requirements, because for some of these loans you may need to be a federal union member.
- Home equity loans – secured type of loan where your home is used as collateral. You usually cannot borrow more than 85% of your home’s value. These loans have the best rates. Just make sure you will have the money to pay the loan back.
- Credit card cash advances – if you have a credit card, you probably have a credit card advance. Check with your bank if you will have different interest rates depending on the sum of money. These loans are best for paying for something you need and the place does not accept a credit card.
Depending on your location, bank, and lenders, there can be other types of loans available that may better suit your needs. LoanMart offers information about the interest rate and types of loans you may want to know. Click here if you want to know more about fast cash in Orlando, Florida.
Why do you need the money?
This is the critical question you need to ask yourself before getting a loan. Depending on your needs, you can find the type of loan that will work for you. If the reason you need money is not an emergency or if it can be postponed for some time, you better check other options.
Taking a loan, especially if it is with collateral should be given a lot of thought and you should be sure that you can pay the loan back.
How much can you afford to borrow?
The monthly rate, the interest and the total amount repayable are the things you need to consider before you take out a loan. You should remember that covering the monthly rate is not the same as being able to afford the loan.
Calculate the whole amount you will need to repay and if needed, consult with a professional about it.
Never take a loan whose monthly rate is higher than your monthly income. Here you also need to factor in the bills, rent and the cost of living.
Credit score and credit history
The credit score shows how likely you are to repay the loan. It is primarily based on a credit report – information that is sourced from credit bureaus. The credit score numbers vary from 300 to 850, and the higher the score, the more trustworthy you are.
The credit history shows if you’ve borrowed money before and if you paid them back.
You need a good credit score and good credit history to be able to borrow money from a bank or a lender. Without this information and without the right numbers, you won’t be able to take a loan.
Loan terms and hidden fees
Pay attention to the fees and loan terms that are not always openly discussed. They include:
- Loan processing fee;
- Failed payment fee;
- Prepayment fee;
- Late payment fee.
You should borrow money when…
If your business or job is going well, now is the time to think about borrowing the money you need. When the cash flow is steady, banks are more likely to give you money at your desired rate.
You should not borrow money when…
If you spend more money than you earn and if your bills are about the same amount as your income, you should not borrow extra money. Make sure you will be able to pay the monthly rates before you take a loan.
Another thing you should think about is already existing loans. If you borrowed money before and you still haven’t paid them back, don’t take another loan. You may close a door, but you will open a window. Postponing rarely works and you will be stuck in an infinite loop.
Loan Facts and Tips
Here are some tips you should check before taking a loan. Pay attention to these and try to follow them.
- Never take a personal loan that’s higher than your monthly income;
- Don’t borrow money you cannot repay;
- Compare lenders and get the best rate;
- Ask questions and read the fine print;
- Check the early-repayment penalties;
- Some lenders offer lower interests for larger loans. Check if it’s smarter to borrow a bigger amount;
- Too many loans put you in the high-risk category. Don’t do that;
- Check your credit score and report any errors;
- Stick with fixed rates;
- Don’t always use automatic payments;
- Not all loans are good for all uses. Choose the type of loan wisely.
If you need fast cash and you know you can afford to pay the monthly rate and pay the whole loan back, borrowing money from a bank or a lender is a good option for you.
Consult with a professional before borrowing money and be safe and smart.