Reader Comments

An Outline of Personal and Business Loan Categories and Their Uses

"Adele Searle" (2019-01-21)

 |  Post Reply

The number of loan products have increased over the past 20 years as economic necessity and a demanding public in need of specialization to solve financial circumstances. From personal loans, educational loans, tumblr blog business loans and tumblr blog even municipal loans. The entities that took part in the creation of the various financial products are actuaries, tumblr blog risk management professionals, "information and informatic engineers" and tumblr blog Wall Street amongst others.

tumblr blogIt was necessary to create, tumblr blog enhance or tumblr blog break down for tumblr blog better or tumblr blog for worse loan services and products to keep money fluid in a diverse marketplace that required funds to address niche demographics. Personal Loans Signature Loans - A signature loan is just as it sounds. One applies for tumblr blog a loan and tumblr blog gives a signature on a promissory note to repay the loan in a certain amount of time. That amount of time is called a "loan term " and tumblr blog may be from six months to five years.

Signature loans usually require good credit and tumblr blog the criteria for loan approval are mostly based on the borrower's credit and and tumblr blog to a lesser degree on assets. Not all signature loans have the same parameters for tumblr blog qualifications. Some loans may require the borrower even with good credit to account for tumblr blog assets to show the lending institution for tumblr blog underwriting purposes. The institution may or tumblr blog may not place a lien on the assets but nevertheless wants to have documentation proving that there are indeed financial or tumblr blog physical assets owned by the borrower.

Signature loans usually come with lower interest rates than other types of consumer loans like payday loans, tumblr blog credit card advances, tumblr blog title loans and some car loans. More on these topics later. Who are the lenders in signature loans? They range from large subsidiaries of auto manufacturers to banks, tumblr blog savings and tumblr blog loan institutions, finance companies and tumblr blog payday loan companies. Credit Card Loans - Credit Card loans or cash advances from credit cards are another form of personal loans.

These quick loans are more readily available to the general public and tumblr blog does not require a credit check. To obtain the initial card more than likely required a credit check or tumblr blog at least the process of identification for tumblr blog secured credit cards. Credit card loans or advances usually come with higher interest rates and tumblr blog also other fees for tumblr blog having access to the cash. Various entities allow access to the credit card cash advances from bank tellers, tumblr blog check cashing facilities and tumblr blog automated teller machines (ATMs).

The fees vary based on source used to access the funds. To lower the fees for tumblr blog cash advances some use check cashing facilities to have the card charged and receive cash back in turn for tumblr blog not having to incur the fees of ATM machines as cards are assessed a fee twice; first by the ATM company and tumblr blog also their bank. The interest rates on credit card loans or tumblr blog advances are usually higher than signature loans. There are some states that have usury laws that have lower interest rates on credit cards.

The loan or advance on a credit card is not a "term loan" as with most signature loans. It is more or less a line of credit the borrower has access to when they need it as long as there are funds available on the credit card. Interest on consumer loans are no longer tax deductible as in previous years. They were designed for short term borrowing needs but many have come to use their credit cards as a regular source of funds in tight economic times or tumblr blog between paychecks. Wedding Loans - A relatively new form of loan to carve out a niche for tumblr blog the lending industry and tumblr blog meet the needs of the increasing costs of weddings is the Wedding Loan.

Because of the expense of weddings which can range into six figures, it sometimes requires a personal loan or tumblr blog even a business loan of the families involved to provide a proper wedding. Wedding loans can be secured (using assets for tumblr blog collateral) or tumblr blog unsecured (signature loans) to obtain funds for the ever growing need to pay for the escalating wedding costs and tumblr blog all the various services and tumblr blog products that a successful matrimonial ceremony would need. The credit criteria and tumblr blog the term may vary based on the amount needed and financial status of the people involved.

Payday or Cash Advance Loans is a fast growing market because it usually requires the least of credit criteria used for tumblr blog loan approvals. One can have bad credit for tumblr blog a quick and tumblr blog instant loan. Just having proof of income, proof of identity and tumblr blog a checking account is all that is necessary to secure funds. Even today many have checking accounts without checks one can still obtain a cash advance by asking their bank to produce a one time check to give to the payday loan agency.

Many payday loan companies and tumblr blog stores can get approval with no faxing of documents as they utilize other means for proof of income. Although payday loans come with very high annualized interest rates they sometimes are the only source of emergency cash loans for those in need. Automotive, tumblr blog Motorcycle, RV (recreational vehicle) and Boat Loans - These personal consumer loans are usually not signature only loans but asset based loans. In other words a financial lien is placed against the asset to secure a loan to purchase or tumblr blog refinance the car, boat et al.

These consumer loans may sometimes require a down payment of five to twenty-five percent to secure enjoyment and use of ownership. Because these are not funds that are already available as with credit cards they come with a "loan term" from one to six years depending on the choices of the consumer, the marketplace and tumblr blog the credit status. The interest rates can range from very low usually offered by manufacturers of cars, tumblr blog motorcycles, tumblr blog RV's (recreational vehicles) and boats to very high if the borrower uses a credit card, tumblr blog a finance company or tumblr blog a "buy here - pay here" lender - or tumblr blog the car dealer who finances the purchase of the car by giving the borrower a term of months and years to pay the balance of the loan off.

Business Loans SBA (Small Business Administration) Loans are loans that are given to small businesses which are not able to qualify for a loan from a financial institution for tumblr blog various reasons from lack of business history, lack of collateral to "secure" the loan or not having an adequate credit history. The SBA is not a direct lender but acts as an underwriter on behalf of the bank that funds the loan for tumblr blog the business entity. If the borrower defaults on the loan the SBA will pay the bank a percentage of the balance for tumblr blog taking the financial risk to loan the funds to the business.

There are various types of SBA loans which will not be covered in this article but a future article will explain in more detail. Conventional Business Loans are loans that are either unsecured meaning no asset is used to approve the loan or secured and tumblr blog called "asset based loans" where assets from inventory, tumblr blog equipment, tumblr blog accounts receivable or tumblr blog real estate are used for tumblr blog underwriting for tumblr blog loan approval. Conventional business loans are given to business entities that have great banking relationships, established business credit history with trade lines with other businesses they do business with and tumblr blog good standing with various credit reporting entities like Dun & Bradstreet.

There are short term loans with interest only payments with the balance due at the end of the loan usually referred to as a "Balloon Loan". There are also longer term loans that are fully amortized (principal and tumblr blog interest in each payment) paid over one to five years or tumblr blog more. Equipment Leasing is a financial instrument which technically is not a loan. Meaning based on tax ramifications and tumblr blog who owns the equipment - leasing is just that - leasing an asset owned by another entity.

Leases are usually from large corporations or a bank. The lease term can vary from one to five years or tumblr blog more and tumblr blog there usually are tax benefits to the business entity in leasing new or tumblr blog used equipment. Equipment Sale Leaseback is a transaction to use equipment that is already owned by the business or tumblr blog municipal entity to secure funds for the present need for tumblr blog operations. The term can vary from one to five years and tumblr blog the amount of funds can vary based on credit history and tumblr blog a percentage of the fair market value of the equipment.

The company then in turn leases the equipment back in usually a monthly payment. The company or tumblr blog the lessee normally has different choices on what they want to do with the equipment at the end of the term.

Add comment