There are two types of debt that can exist in an individual or a businesses’ financials. One type of debt can exist or both can exist and co-exist together. Having fast cash loans or credit or even both has its own advantages and disadvantages. Sharing a few of the pros and cons of having credit.
Having Credit allows the credit hold the benefit of purchasing goods and/or services now and being able to pay for it tomorrow. This allows the credit holder to delay payments to the seller or service provider.
Credit allows a credit holder the benefit of purchasing goods or services that are priced more than the current amount of cash that he or she may hold. In a way, it extends the actual purchasing power a credit holder may have.
Credit lines can be used as an evaluation of an individual’s credit score. This can help in applying and negotiating for a low interest loans as a borrower with good credit standing.
Credit comes with an actual credit line which may become a disadvantage especially when a card holder has the habit of maxing out the credit line that has been granted. It slowly becomes a burden as most credit lines granted are just enough for a credit holder to pay the minimum when maxed out.
Late payments can eventually damage a credit score of a business or an individual. Applying too much credit to what is reasonable can cause problems in paying the dues in the future.
Credit repayment contains interest and other finance charges that come along with paying on a future date. The purchase of the goods and services tend to be paid with an extra cost brought about by interest rates and finance charges.
Generally, a guideline you can follow on credit management would be using up credit up to 10 to 15 percent of your current income. Try maintaining spending at this level unless there is a need to go beyond. This will help in managing credit payments and will not take up much of your income. Other expenses can still be paid without burden.
Personal loans are one of the loans you can apply for and use for general purposes. The lender does not restrict the borrower on where to use the funds. It can be used for purchases, education or even capital used to set up a business. Personal loans are often harder to get approval from because of the qualification that is required. When considering a personal loan, here are a few points that may help you understand the loan prior to getting one.
Fixed amount and rate paid on a fixed payment period
Personal loans are loans which are specific in three areas: amount, rate and payment period. A fixed amount is granted by the lending company in manila based on the credit standing that a borrower may have. Most lenders base the amount granted on the borrower’s income and capacity to pay. Once you have been approved of the loan, the amount granted will bear an interest that is fixed and often compounded annually. This is the charges that the lender will charge for letting you borrow the money. To pay off the amount borrow with the interest it carries, the entire loan will be paid on a fixed term which can vary from 12 months to a few years.
Personal loans are unsecured loans
One reason why personal loans carry high interest and difficulty in approval is because of the reason that they are unsecured loans. The lender does not require any collateral or lien on equity to grant a loan. The loan is granted fully based on the banks credit investigation and evaluation. Although there are no collateral and lien on the borrower’s asset, there are still other ways where a lender can forcefully collect from the borrower such as a lawsuit.
Longer term, more interest
A personal loan will be paid at a fixed term to be agreed between the lender and the borrower. Although a borrower may be granted a longer term, we need to keep in mind that the longer the term, the more interest we will be paying the lender back. Keeping the loan on a short term will help you eliminate the debt earlier and with less interest.
There are two types of loan which a lender may grant. The first one is an “Unsecured Loans” where the lender grants the borrower an amount without any security that the loan will be paid in full.
The other type of loan is a “Secured Loan” where an asset is pledged to secure the loan in case of borrower’s default on payment. The asset placed on lien allows the lender to sell the assets to recover any loss incurred from borrower’s default. This asset placed on lien is called a “Collateral”.
Under a secured loan, there are types of collateral that can be used by a borrower as a security.
Real assets are properties owned by the borrower that are often used as collateral. Most lenders prefer this type of collateral as it is high in value and often appreciates. Any real property that is subject to depreciation such as houses or buildings often depreciate slower relative to the value of the loan.
These are physical assets excluding real property. Tangible assets are subject to depreciation and are often considered as collateral subject that the value of the asset exceeds the value of the loan. The reason for this is that tangible assets often have a short life and the value of the asset drop rapidly during the depreciation period. The dropping of value is often quicker than the current value of the loan after payments. Examples of these tangible assets that can be placed on collateral are cars, inventory and / or equipment.
Intangible assets are assets that have no physical attribute such as cash accounts, equity portfolios and accounts receivable. This type of collateral may be advantageous for a lender as this type of asset is considered to be more liquid compared to tangible assets. There are cases where a lender would avoid equity portfolios as collateral due to the nature of its volatility.
A lender may accept a collateral to ensure that a debt is secured. The primary goal of a lender is to ensure the collectability of the money that has been granted as a loan. Having a collateral at hand minimizes the risk of incurring loss.
Loans are means of borrowing money to purchase goods and services that is paid by the borrower through a fixed term. Payment made by the borrower includes the interest fees and other finance charges that are applied by the lender for borrowing the money. The loan includes terms that govern the transaction between a lender and a borrower.
Loans are often provided by a financial institution or a licensed money lender singapore but can also come from individuals or businesses looking for ways to grow their money. This act of borrowing and lending helps grow the market with the overall flow of cash in a country’s economy. Below are the major types of loan that are flowing within the market:
Payday or Cash Advance Loan – This type of loan are often short term loans that are granted to a borrower to address immediate financial concerns. This type of loan often come with high yielding interest rates that can become a concern if the loan is not paid on time. A payday loan singapore or cash advance loan are unsecured loans which backs the reason for high interest rates.
Personal Loans – Also known as general type of loans. Similar with a payday or cash advance loan, they are unsecured loans that a borrower can use for whatever need they have. Personal loans singapore often have a high yielding interest rates as well. On the other hand, this type of loan is often long term and of high value. It requires a much thorough credit review of the borrower compared to a payday or cash advance loan.
Business Loan – A business loan is a type of loan that is acquired by an entrepreneur or a business for business operations. It may come as an unsecured or secured loan. Unsecured business loan does not require the borrower to give a collateral while a secured loan is granted otherwise. A collateral may be in the form of property or even a lien on the equity of the business.
Mortgage Loan – This is a specific type of loan that a lender provides a borrower for the purchase, build or finance of a property. The proceeds cannot be used for any other purchase other than for its intended use. The terms and conditions of this loan is specifically drafted based on the purchase of a property.