Everyone needs cash for different needs like paying bills, buying groceries or maybe starting a new business. Sometimes your primary source of income isn’t adequate to fulfil your financial needs. You need to get a loan from a bank or other financial institutes like a money lender to deal with your monetary requirements in such cases.
Apart from traditional ways like banks, some other methods can help you get some cash. Here are five different types of loans you can use to manage your financial needs. Let’s take a look at them.
- Credit Card
A credit card is one of the widely used methods of getting instant loans across the world. Every time a cardholder pays with a credit card, it is equivalent to taking a small loan. The cardholder is supposed to pay back the amount in a particular period.
If they fail to do so, the bank charges interest every month until the cardholder pays off the loan. As helpful as credit cards are, it’s essential to use credit cards wisely. Poor financial habits can lead to massive debts.
- Business Loans
A steady flow of income is essential to run a business smoothly. If you own a business, you must have needed to raise funds at some point in your life. Business loans are one of the ways business owners can raise funds. As easy as it might sound, getting a business loan from a traditional bank has its challenges. The applicant needs to have a strong financial history which plays a significant role in getting the loan approved by conventional banks.
- Money Lending Services
Money lending services are one of the popular ways of raising funds for personal or business needs. A licensed money lender will provide you with a loan with lower interest rates and lesser terms and conditions than traditional banks.
These money lending services do not emphasise your financial track record as long as you successfully pay each payment instalment. Raising money from a licensed money lender is a faster and safer way for any individual who finds it difficult to raise funds from traditional banks.
- Personal Loans
Getting a personal loan from a bank can be helpful for any individual who has a clean financial history. Many banks reject the loan application if the applicant has a poor financial track record. Personal loans usually have shorter tenure and reasonable interest rates.
Usually, banks have strict terms and conditions to pay back the loan. The applicant also needs to submit various documents and any assets as collateral for the loan. Personal loans can be a good option for individuals with credit card loans to transfer the balances to lower interest rates.
Mortgages are the loans provided to individuals by banks, private money lenders and credit unions to buy a home. The mortgage is tied to the house, which means that you risk foreclosure if you miss monthly payments. A mortgage is considered a secure loan; that’s why it has a lower interest rate than any other type of loan. Though banks offer variable-rate loans, many homeowners go with fixed-rate mortgages.
The applicant’s credit score also plays a significant role in determining the interest rate of the mortgage. A higher credit score equals a lower interest rate. If you plan to get a mortgage to buy your dream home, make sure you have a good credit score and all the necessary documents to get faster loan approval and lower interest rates.
It’s crucial to know the various choices you can have while getting a loan. A little research and some visits to your nearest bank or private money lending service can help you make a better decision.