Basics of Borrowing

Trying to build a comfortable life is getting difficult because the income you earn most of the time cannot cope with the high cost of living today. It is therefore not surprising that many turn to applying for various types of loans from banks and other lending institution especially if there is a need to address an immediate expense at hand. personal loan in Singapore and other type of loans are usually the solution to most financial problems. Today there are various types of loan available in the financial market that is a big help to those in dire need of financial assistance.

 

Borrowing From Friends and Relative

 

There are today several and very common ways in filing for monetary loans from any loan company, banks and other lending institutions. The following are just some of the financial resources that you can turn to for financial assistance. Most people who suddenly need financial assistance would usually turn to families and friends for help. Being able to borrow from relatives and people you know is the most advantageous way of securing a loan. Families and friends do not usually require you to pay interest nor will they pressure you to pay at the soonest possible time or give a specific time to pay for the loan.

 

Cash Advance from Credit Card

 

Getting a cash advance from your credit card is another good way of getting a loan without the hassle of applying for one and undergoing a credit check. You can also use the balance transfer scheme where you shift the debt from one of your credit card to one that has a lower interest rate.

 

The Margin Loan

 

There is also the margin loan where people borrow from their life insurance coverage, mutual funds and/or stocks. The lender which is usually the broker will use the financial documents as a form of collateral. However, borrowing against these financial documents may be risky since these papers have a tendency to depreciate so you may end up paying more for your loan. When BORROWING money make sure that you know what to do, how to do it. Without knowing the basics of borrowing, you just might end up in worst financial situation.

Types of Interest Rates

Whatever type of loan you apply for you can be sure that the loan that you were provided with will carry an interest. How much interest is usually what concerns the BORROWING individuals but if you study loan principles more closely, you should also be concerned with the type of interest that is placed on it. There are several types of interest used by most financial institutions today and they are the following.

 

Simple Interest rate

 

This is the most basic type. Simple interest is paid only once and the rate will not change. For instance if you borrow from a money lender Singapore  the amount of 100 dollars and he tells that the simple interest for one year will be 10% of the principle. This will tell you that the interest for one year would be 10 dollars so when the loan matures after one year you would have to pay the lender a total of 110 dollars.

 

Compounded Interest rate

 

Compounded rate on the other hand will charge interest on the Principal and on previously earned interest. For example if you borrow 100 dollars with a yearly compounded interest rate of 10% and the term of the loan is two years you will be paying a total of 21 dollars in interest. The breakdown is 10 dollars for the first year and 11 dollars for the second year.

 

Amortized Interest rate

 

Amortized interest rates are common to hard asset loans like home and cars. The principle here is for the borrower to pay a larger amount of interest and smaller amount of principal at the first few years of the amortization. As time passes on the amount paid on the principal start to increase while the amount paid on the interest starts to shrink.

 

Fixed interest rate

 

Fixed interest rate is pre-determined and stays the same all throughout the life of the loan. These are usually applied to long term loan.

 

Variable; prime and Discounted Interest rate

 

Variable interest rate changes depending on the underlying interest rate which is the current index value. Prime rates on the other hand are interest rate given to preferred clients while discounted rates are those usually provided by Federal Reserve Bank to other banking institutions.

What is a 90 day Short Term Loans

If you are in dire need of a loan due to an unexpected expense, there are now short term loan providers that you can run to. These loan providers can immediately approve and release loan even without considering the credit score or rating of the BORROWING individual. Also known as 90 day loan lenders, they easily provide loans even without a credit check. Even with a poor credit rating these types of lenders will still accept your loan application. So if you are over 18 and have a steady job and income, chances are you will qualify for the fast cash loan.

 

How does a 90 day loan works?

 

Applying with this type of MONEY LENDER is quite easy because you can easily fill out their application in a matter of minutes because the questionnaire itself is very basic. Once you’re done with the application form they will normally review and verify the truthfulness of the income that you have stated. Once your income have been verified, you will be offered a loan the amount of which will be based on your stated income. You should however only take an amount that is specific to your need and nothing more. These lenders normally offer more than what you need because they can profit more from that. Always remember only to borrow the least amount that you need and pay it back as soon as possible to avoid being neck deep in debt.

 

90 day repayment scheme

 

You are normally given three months to fully pay back the loan. However the protocol is for the lender to divide the total amount that you borrowed by the number of times you get paid. If you get paid by the month then, the loan will be divided into 3. If you are paid by the week, then the loan amount will be divided by 12. 90 day loan lenders are required to fully disclose the full amount of interest of the loan to the borrower even before the latter applies. This makes it easier for him to know what the total cost of the loan would be.

Various Short Term Financing Options

Short Term Loans have become a viable tool for most small businesses and entrepreneurs.  This is because they are quite adaptable to small businesses environment in terms of expansion, increased expenses and for those that have seasonal revenue fluctuations. Here are two of the short term financing models that most small businesses usually avail of.

 

Merchant Cash Advances

 

This type of short term loan is very ideal for small and medium scale businesses that have a steady and consistent sales coming from debit and CREDIT card. This type is best for businesses that is short on collateral or have too low of a credit score or rating to qualify for the more traditional and conservative method of BORROWING. The cash advance is usually paid by giving the MONEY LENDER a percentage of the total credit and debit card sales. This continues on until such time that the whole or entire amount including fees and interest has been paid. The setback here is that merchant cash advances tends to be a little expensive but this will depend mostly on the daily sales amount and since payment is attached to the daily sales, if the business revenue for the month is small the payment for the advance will be small as well.

 

Business Lines of Credit

 

This loan system works more like a credit card and is more ideal for businesses that need a continuing source of working capital. They fit businesses that have been in operation for at least a year and have at least a sizable amount of revenue by the end of the year. The way the loan works is for the lender to provide the business a specific amount of credit to be use as they please. The borrowers are to pay the advance by remitting only a small part of the loan each month. This is less expensive because the interest will dip each month considering that the interest is always charged on the outstanding balance. There are several more options of short term solutions for small businesses and though these options have a higher interest rates and fees as compared to long term loans, they are still the best solutions for revenue, expansion expense and inventory problems.

Other Types of Personal Loans

A PERSONAL LOAN is perhaps the most common type of loan individuals usually apply for. Banks are the most common financial institutions that provide this kind of financial assistance and those who usually apply are normally direct clients of the bank. More often than not this type of financial loan is unsecured and is deemed to be a high risk investment. It is also referred to as a small bank loan. When applying for personal loans, lending companies would perform strict credit check and verify the income of the borrower. In extreme cases the lender would ask the borrower to show proof that he has at least some properties that is worth at as much as the amount of money he or she is borrowing. Usually, this type of loan is approved or denied within a matter of days.

 

Higher Rates for Personal Loans

 

The disadvantage of applying for a personal loan is the fact that you would have to pay a higher interest rate as compared to other types of loan and repayment terms usually do not exceed twenty four months.

 

Convertible, Fixed Rate, installment & PAYDAY LOAN

 

Personal loans come in a variety of loan packages. First there is the convertible loan that is normally used for businesses. Convertible loans allow lenders to convert the principal loan amount into equity in the borrower’s business venture. This actually may be worth more than the loan and this is one risk the borrower would have to take. Fixed rate loan is another type of personal loan where the interest charge on the loan is fixed and do not vary.  There is also the installment loan where the borrower repays the principal amount plus interest via monthly amortization. Payday loan is a new type of personal loan that is being offered in the market. Also known as cash advance loan, this is easy to avail of. Its accessibility however makes it a very costly aside from the fact that it incurs a very high interest. The loan is usually short term.