There are a lot of reasons why people might need loans. This could be to get a new suspension for your car that suddenly broke down, or for taking care of the funeral of your old grandfather that just passed on and so on. There are a lot of reasons why people might need loans. Although, the tricky part is getting the loan. People can take a loan from their friends, relatives, banks, commercial lenders and so on. People that don’t have friends or relatives they can borrow from have to rely on banks or commercial banks. While it’s easy to get a loan, you have to be careful not to get yourself into taking a bad loan, which would leave you financially worse than you were, before taking the loan. This is the purpose of this article, to highlight tips to put in mind when considering taking a loan.
Banks: Whenever you think loan, think bank. Your local bank is the best option for you if you’re considering a loan of a significant amount. The main reason why bank loans might be the best option is that of their low-interest rate. In addition to having low-interest rates, they also offer favorable repayment terms, especially for clients that have a good credit score. The bank knows the financial state of the borrower, and would only give a loan they’re sure the client would be able to return.
It usually takes a short period for banks to process a loan application. This is the only downside to taking loans from banks; you’d have to wait for a considerable amount of time before you’d be given. This might not be the best option that needs the money urgently, and immediately. Also, banks usually don’t provide loans to clients that have a poor credit score. Such clients are referred to as not creditworthy. In cases where the loan is eventually approved, they’d be asked to provide a co-signer or submit collateral in case they default on the agreement with the bank.
People are allowed to borrow money from their retirement plans. Although, there is a limit on how much you can borrow. The limit is usually around $50,000 or less. However, this is the best way of getting cash without delay. The reason why it’s a good idea taking out money from your retirement plan is that the money is yours, and when you pay back, you do this with interest, which is also your money. This should be an option if you have poor credit scores and can’t secure a loan from banks. The only downside to this is that taking money from your retirement plan would stop the compound growth you have on it, and this might set you back a couple of years on your retirement goal.
References (2019). Retrieved from https://www.creditloan.com/personal-loans/ LendingTree - 1-800-675-5153. (2019). Retrieved from https://www.lendingtree.com/ Müller, E., & Reize, F. (2010). Loan Availability and Investment – Can Innovative Companies Better Cope with Loan Denials?. SSRN Electronic Journal. doi: 10.2139/ssrn.1605209