231 Front Street, Lahaina, HI 96761 info@givingpress.com 808.123.4567

Knowing the different types of loans

A loan is a type of debt. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower. The borrower initially receives an amount of money from the lender, which they pay back, usually but not always in regular installments, to the lender. This service is generally provided at a cost, referred to as interest on the debt. A borrower may be subject to certain restrictions known as loan covenants under the terms of the loan.

Acting as a provider of loans is one of the principal tasks for financial institutions. For other institutions, issuing of debt contracts such as bonds is a typical source of funding. Bank loans and credit are one way to increase the money supply. Legally, a loan is a contractual promise of a debtor to repay a sum of money in exchange for the promise of a creditor to give another sum of money.

Here are some of the different type of loans that borrowers usually take:

  1. A secured loan is a loan in which the borrower pledges some asset (e.g. a car or property) as collateral for the loan.
  2. A mortgage loan is a very common type of debt instrument, used by many individuals to purchase housing. In this arrangement, the money is used to purchase the property. The financial institution, however, is given security — a lien on the title to the house — until the mortgage is paid off in full. If the borrower defaults on the loan, the bank would have the legal right to repossess the house and sell it, to recover sums owing to it.
  3. Auto Loans. In some instances, a loan taken out to purchase a new or used car may be secured by the car, in much the same way as a mortgage is secured by housing. The duration of the loan period is considerably shorter — often corresponding to the useful life of the car. There are two types of auto loans, direct and indirect. A direct auto loan is where a bank gives the loan directly to a consumer. An indirect auto loan is where a car dealership acts as an intermediary between the bank or financial institution and the consumer.
  4. A type of loan especially used in limited partnership agreements is the recourse note.
    A stock hedge loan is a special type of securities lending whereby the stock of a borrower is hedged by the lender against loss, using options or other hedging strategies to reduce lender risk.
  5. Unsecured loans are monetary loans that are not secured against the borrowers assets. These may be available from financial institutions under many different guises or marketing packages like a credit card, personal loans, bank overdrafts, credit facilities or lines of credit and corporate bonds.
  6. Predatory lending is one form of abuse in the granting of loans. It usually involves granting a loan in order to put the borrower in a position that one can gain advantage over him or her. Where the moneylender is not authorized, it could be considered a loan shark.

The car loan basics

Nowadays, you can find so many car financing institutions that offer different car loan schemes. You can easily find them in thousands of car dealerships, bank financing, lending companies, and online lending services. Most of them offer the most affordable and easiest way for consumers to own a car.  And because of instant approval car loans, many people are enjoying a hassle-free car buying experience.

But purchasing a new or used vehicle is either exciting or frustrating. Pushy salesmen and dealerships have a habit of taking advantage of unsuspecting buyers. Additionally, the temptation to buy more than you can afford is a common problem. However, securing financing before entering a dealership showroom is a great way to take the hassle out of buying a car.
The first thing that the buyer need is understanding instant car loan basics. New car buyers and those unfamiliar with car buying tactics may pay sticker price for a vehicle and accept dealership financing without shopping around. Unfortunately, dealerships prey on buyers of this sort. Prior to buying a car, it is essential to shop around and compare offers from various lenders. To avoid a dealership scam, you may consider getting approved for an auto loan before beginning your search.
The internet is loaded with auto loan lenders offering instant approval loans. With instant approvals, you receive a response immediately. The applications are easy to understand and very quick. Simply input basic information such as income, employer, desired amount, etc. Then you will just wait for them to reply so you can proceed to the next step. Instant approvals work two ways. The lender may either approve a stated loan amount, or determine an affordable loan amount based on your income and debts.
But how can you find a lender that offers instant approvals? Various online car lenders offer instant approvals. However, if you are hoping to compare several instant approval offers, use a car loan broker. This is the easiest and simplest way to shop around for the best car loan offer. Brokers are recognized for supplying multiple offers and they know where to find the best offer for your specific needs. Wise consumers know the benefits of this feature. By obtaining multiple offers, you are able to compare auto loan rates, terms, and services. Choosing the loan offer with the lowest rate will lower your car payment. Even if the dealership offers you a finance package, before accepting their offer, complete an online quote request. Dealerships tend to adjust auto loan rates to benefit their bottom line.
After you go through these procedures, you can now finally complete the car loan paperwork. After receiving the instant approval quotes, the next step involves choosing the car loan lender with the best offer. If using a broker, you are obligated to complete an official loan application with the lender. Upon approval, the lender will deliver a check to you. Once you decide on a car, and negotiate a sales price, you simply sign the check over to the dealership, which completes the transaction.

Car financing options

Finally, you have found your dream car and can’t wait to drive it around the city, but there’s only one thing that has crossed your mind while staring at it: how can you finance the car purchase. Nowadays, there’s a bigger chance that you’d be paying for your car through one of several financing schemes.

And understanding the basics of each car financing option is key to choosing the car financing strategy. Here’s some overview of car financing options that may be available to you.

  • Car Loans from Lending Institutions.
    you can get a car loan from a bank, credit union, or other lending institutions. The car that you purchase will serve as collateral for the auto loan. This means that the lender can repossess your vehicle if you default on the car loan. Car loans are a popular car financing option because they generally offer reasonable interest rates and are relatively easy to get.
  • Dealer financing.
    Like the traditional car loans, dealer financing is reasonably easy to get. Most dealerships have relationships with numerous lending institutions, so they can arrange car loans even for car buyers with blemished credit histories. To compete with traditional bank loans, many dealerships offer zero percent or very low interest on dealer loans. However, such loans are available to car buyers with stellar credit ratings. Consumer experts advise car buyers to get pre-approved for an auto loan from a bank or credit union before approaching the dealership for possible financing. By getting loan pre-approval from another lending institution, a car buyer gets the upper hand when bargaining for a lower rate on a dealer loan.
  • Home Equity Loans and Home Equity Lines of Credit
    If you own a home and have accumulated substantial equity on your property, then you may consider getting a home equity loan or a home equity line of credit. Home equity loans are fixed or adjustable rate loans that you repay over a predetermined period. Home equity lines of credit are open-ended, adjustable-rate revolving loans with a maximum credit limit based on the equity of your home. Home equity loans tend to have lower interest rates than credit cards and other types of personal loans. Interest payments on home equity loans may also be tax-deductible up to a certain extent. Home equity loans and home equity lines of credit use your home as collateral, so make sure you are financially capable of paying the monthly instalments if you don’t want run the risk of losing your home.
  • Credit Cards
    A credit card advance or credit card draft from your credit card company can help you drive your dream car home. Like home equity lines of credit, credit card advances or credit card drafts are revolving lines of credit with variable interest rates. To entice existing customers to avail themselves of credit card drafts, credit card companies waive cash-advance fees, guarantee low rates during the initial period of the loan, or offer high credit limits. However, because credit card drafts are unsecured, they generally have higher interest rates than home equity loans, traditional auto loans or dealer loans. Financing your auto purchase through credit cards could also leave you vulnerable to hefty penalty charges if you make a late payment or exceed your credit limit.

3 Reasons Personal Can Become Bad Options

Growing up, we are taught that loans are bad options and we all need to earn and save money for our expenses and expenditures. Our parents would always push us to do better in school to earn well when we grow up. We are also taught that we should be avoiding credit and any kind of loans as they may only bring troubles in our financial standing.

This is the reason we often think that getting a personal loan isn’t such a good option. But is it really a bad option to get a personal loan? Apparently, it is not. Personal loans are actually good strategies in financing. It can help you with how you manage your funds and how you can create strategies with personal loan to improve your financial standing. But with every good thing, there is the other side of the coin. Here are a few things when a personal loan can be a bad option.

  1. Getting a personal loan when you have other outstanding loans to pay.

A personal loan can become burdensome when there are other existing obligations that you need to pay. Always remember that overlapping loans can create high monthly amortizations and expenses.

  1. Getting a personal loan for buying items that can wait.

There are two kinds of purchases that need to be remembered when using a personal loan. The first one is “items that are time sensitive” and the second one is “items that can wait”. When making a purchase using personal loans, items that are time sensitive are in priority. Any item that you think can wait should be bought by saving enough cash first.

  1. Getting a personal loan without a plan or goal on where to use the proceeds.

Any personal loan should have a specific purpose. Remember that getting a personal loan will require interest payments. If there is no specific purpose for the personal loan, your interest payments would just be a waste of money. It would be better to spend within your means.

A personal loan isn’t a bad option as long as there is purpose, plan, and capacity.

3 Reasons Business Loans Are Bad Options

For business owners, business loans are one of the best strategies they can take for any financial crises. They can turn financial crises around using a business loan as part of the strategy. Business loans are great ways to generate enough cash that would help support the business. It can be used for a number of reasons. This includes, but not limited to, raising capital, increasing revenue, or even expanding to other geographic location.

An entrepreneur should know when a business loan would be a good option to take. Getting a business loan should have a plan and a purpose. Without these two, the loan could cause the business a bad financial impact. This is one reason why a business owner should evaluate and analyze everything about getting a business loan. Here are a few reasons when a business loan can become bad options.

  1. Getting a business loan without revisiting your business plan.

When you decide to take on a business loan, you should have revisited your business plan to make sure that your purpose is directed towards your business goals. Identifying and revisiting your business goals will make you review the reason why you need to get a business loan.

  1. Getting a business loan without a purpose for the proceeds.

One requirement you should have as a business owner when making a business loan is having a purpose. Without a purpose, you will be taking the loan proceeds and pay for the interest without any returns. As business owner, returns on cost should be something that is always being considered. In this case, interest payments are costs without any return for that matter.

  1. Getting a business loan with proceeds of more than what the business needs.

Operating a business involves maximizing revenue and minimizing expenses. If you get cash proceeds from a business loan that is actually more than what you need, your expenses increase without a corresponding benefit to increase revenue. Your interest payments are much higher than how much it should be.

A business loan for an experienced entrepreneur will prove to be a good move in building the  productivity of his business by maximizing revenue and reaching out to more people who will benefit.