They say there are a few things in life we can count on, death and taxes. If you are in the banking or the financial industry, you can also count on loans and lending. Loans and lending money out, and also people paying money in, are the foundations of banking. But there are many different versions of loans.
If banks do not receive money being deposited in on a regular basis, or grant loans to people and charge interest, how else would they make money. As everything changes, so has banking and lending money. We as consumers are on the lookout for alternative ways to borrow, and lenders are looking to find alternative ways to give us these loans we want and need. And there are many different types of loans, loans for every need and purpose.
Loans can be broken down into two main categories:
Secured loans have something that secures them, collateral, such as a property, car, maybe even furniture, a boat, plane, something physical and tangible that should the loan not be repaid, can be repossessed or taken back.
Just as it states, unsecured loans are not secured by anything tangible, there is no property or physical item to take back should he loan not be repaid as agreed.
From these two main categories, loans can be further broken down.
Instalment loans are loans where there is a fixed term, such as 12 months, or in the example of a mortgage, 120 months or more. The borrower knows how long they will be repaying the loan, and after the completed term and number of payments, the loan is paid off.
Revolving credit is like a credit card, or a line of credit like an overdraft. You as a borrower are given a credit limit, such as £1000 that you can spend. You also make payments each month based on the balance of your credit limit.
If you reach your credit limit, you cannot access any more credit unless the lender approves you for it. As you make payments, you pay down your balance and make more of your credit limit accessible. The account revolves around you accessing credit, and paying it back.
Not everyone who is in need of a loan may have perfect credit, or a good credit score, or they may have no credit. However, banks and lenders still need to make money, so they still need to lend money, so bad credit loans became something that has grown over the years.
There are multiple forms of bad credit loans, and each has its own unique market or target of borrowers, but they all have a couple of things in common.
Some types of bad credit loans are:
Payday loans are short term loans of usually less than £500, that are paid back on your next payday. The loans are based on affordability, the fact you have a job, and a bank account. They also have a high APR/annual percentage rate due to the fact they are a short term loan.
A guarantor loan is another form of bad credit loan that is based on affordability and the fact the borrower has a guarantor. Someone who if the borrower misses a loan payment, will pay the payment.
These loans carry longer terms and borrowers can usually borrow higher amounts than what they could with a payday loan.
Logbook loans are loans granted against a car or its logbook. The borrower needs a car of value, which then secures the loan. Should the borrower default on the loan, the car may be repossessed.
So, now you know about some of the different loans that you can apply for if needed. If you are in need of a loan in this time, get in touch with Moolr today.