Whether you are interested in getting a money loan or are thinking about entering the money loan business, there are important things you will have to consider before making any move. There are various types of money loan programs to choose from online and this article will help you figure out how to make these loan programs work for you.
Types of Money Loans
Money loans are usually offered in two ways: secured and unsecured. Secured loans are those that guarantee payment through a collateral. Collaterals are assets such as vehicles, jewelry, land titles, or other assets which you surrender to the person who will loan money to you as a means of assuring payment for the loan. Failure to repay the money loan will mean forfeiture of the collateral. The lender will then get to keep the collateral until you are able to fully repay the loan or decide to sell your asset to recoup their loss for the money loan you were unable to repay.
Unsecured money loans, meanwhile, are sometimes called personal or signature loans. These are loans given to you in good faith, and may be given to you with no credit check, and with only your signature acting as the guarantee that you will be repaying the loan. These money loans are usually used for home improvements, vacations, or minor purchases like computers, or for unexpected expenses.
Factors in the Money Loan Business
Because lenders have no way of guaranteeing that the borrower will be able to pay the loan back, especially if the borrower has a bad credit image, and there is a great risk that the money loaned will not be returned, lenders tend to give higher interest rates for unsecured loans. The balance of the loan is usually fixed over a number of payments, and if you pay off the loans early, or pay higher than the fixed minimum monthly amount you have agreed upon, you may be able to repay the money loan fast and with minimal to zero penalties. While unsecured money loan programs tend to be more expensive and less flexible than secured ones, they are best suited for those who cannot offer any tangible assets, or those who prefer short-term loans, or loans which are five years or less.
Whether you intend to be the lender or the borrower, it is important to understand the interest rates involved in loaning money. The decision as to whether or not the interest rate is fixed may sometimes depend on the customer or on the type of purchase to be made. At first glance, variable interest rates may seem more appealing as these usually begin with smaller interest rates, however, these rates gradually increase over the years or the number of payments made, which may make it difficult for you to budget your resources for debt payment in the long run. You may also choose fixed interest rates, which will be easier for you to monitor your money loan.
Another factor to consider when loaning money is the terms of payment, as well as the options you are open to providing your borrowers. Usually, if they prefer to pay for it for a longer time, it means they will only pay a smaller amount for every pay period. This is good for those who have a regular source of income but which may be just enough. However, the longer the payment period also means it will have higher interest rates, which in turn may give rise to balloon payments, which is to say that overdue payments may accumulate and you need to subject it to refinancing.
There are many ways in which you can pay off your money loan. Repayment options include paycheck or bank account deduction, or the lender can send you a monthly statement of account or bill detailing the amount due to be paid. Some financial institutions may send a coupon book allocating a coupon for each payment to be made. You may attach this coupon in your check deposit or deliver it in person. The coupon is a way for both you and the other party to efficiently monitor the payments you have made and pay off the entire money loan.