Secured loans require some type of collateral. Collateral is what is used to secure the loan. In other words it is something you put up that the lender can seize if you fail to meet your loan commitment.
A down payment is not collateral. A down payment is actually not part of the loan at all, but rather a payment up front on the total purchase price of what you are buying with the loan. Sometimes people confuse a down payment with collateral. Even if you put up a down payment you may still need collateral.
In most cases the collateral must be something of significant value. Usually close to the value of the loan and it is most often the item being purchased with the loan. In the case of an auto loan the vehicle being purchased is the collateral. With a home loan the home is the collateral.
Qualifying for a loan is a big stress. Many people do not even bother to try to qualify because they think they can not possible meet the requirements. The truth is that in many cases people have no idea what the requirements are to qualify for a loan.
Lenders will vary in their specific qualifications for a loan, but there are some general requirements that most lenders use. They are as follows:
- Your credit rating. Lenders do not expect picture perfect credit. This is the most commonly misunderstood factor in loan a qualification. Do not avoid applying for a loan just because your credit is not perfect. You may be surprised at the loan offers out there for those with less than perfect credit.
- Your income. Lenders want to see that you will be able to afford the loan. They ideally want steady income for the past three to four years. You should be able to show that you have adequate income to finance the loan you want.
- Your expectations. Legitimate lenders will try to help you understand what you can afford and make sure that your expectations meet what you can afford and what they will offer to lend you.
A good lender will work with you to try to help you get the money you need. You will find that for some types of loans you can usually qualify if you shop around and seek out helpful lenders.
You have probably heard of predatory lending. Predatory lending is a serious problem and in hard economic times it becomes a serious threat. Predatory lenders prey on those who are already in financial trouble and help to dig them deeper into debt.
Most often the result of predatory lending is that a person loses their home and ends up in serious debt. Predatory lending is, in fact, defined by the fact that the homeowner does not benefit at all from the transaction. In a traditional lending situation the homeowner does benefit.
Predatory lenders often use coercion and abusive practices to get borrowers. They often target people of lower incomes, the elderly and minorities. Most states have laws or are in the process of setting laws regarding predatory lending.
The keys to predatory lending are that they charge high fees, include unnecessary products and excessive penalty charges. Most of the time a regular lender can provide the same services for much lower costs.
A credit union differs from a bank in many ways. Some of the differences of a credit union help to make it the better choice for borrowing because a credit union can offer you the best deal.
A credit union does do the following things, which most banks do:
- pass on costs on insuring loans
- include hidden fees or charges
- charge high interest rates to stay competitive
- charge penalties for early pay off of a loan
- customize a loan to your personal situation
While the cost of a loan through a credit union will vary you can expect to find them more reasonable than a bank. This is due to the many factors listed above. Also credit unions are more oriented on the customer because the customers are members of the credit union and essentially a part of the credit union. This is also why credit union loans are more customizable.
As you can see the benefits of getting a loan through a credit union are amazing compared to getting a loan through a bank. It is well worth checking into with your local credit union.
If you have decent credit then you may come along a situation where you are asked to co-sign on a loan for a friend or family member. The reason they need a co-signer is because they can not get the loan with their own credit. Basically, the lender doesn’t believe they are credit worthy.
While you may know the person and really think they will be fine with the loan, you should consider what the lender is saying. It could really help you to stay out of trouble.
When you co-sign a loan you are saying that you will be responsible for the loan if the other person is not. So, if your friend or family member decides they are going to default on the loan then you have to handle it. Otherwise you could face credit trouble.
This is a big decision and you should not feel forced into it. Many times when it comes to friends and family it is hard to say no, but unless you are positive that they will not default you should consider saying no to co-signing. You have to think about your own credit and financial situation before you start worrying about other people. Chances are they may be mad at first but they will get over it and you will have saved yourself a lot of hassle.
The golden rule of loans is to borrow only what you need. No matter what type of loan you need or what you are borrowing money for, you need to always try to keep it as low as possible. The more money you borrow, the more it will cost you.
Make sure you are really positive that you need to borrow as much as you are. Make sure that you can not get a better deal or possibly fund your purchase in part through some other method.
Borrowing only what you need helps you to remember that you are going to have to pay it back, so you want to borrow for a purpose. Never borrow just to borrow. Some people do that and that can cause a lot of trouble.
Borrow only what you need and you should be fine when it comes to paying it back.
Everyone has had the situation pop up where a friends or family member has asked to borrow money. This is always a tricky situation. It is often a situation where you feel obligated to loan them money without considering the risk.
It is your money, though, and you do not have to loan it to anyone. Loaning money to friends or family is actually quite risky. They have a lot of power over you and this can lead to you never getting repaid.
Of you only lent them $20 or $30 then not getting it back may not be that big of a deal, but if you loan larger amounts of money it could be a problem when they do not pay.
Loaning money to friends or family is something you should really consider carefully. Do not simply assume they will pay you back. If you loan a large amount then make sure you know when it will be paid back. You have to state the terms of the loan clearly so they understand it is not a gift, but an actual loan that must be paid back.
You can not be too worried about your friend or family member’s feelings that you do not look out for yourself. People lose money al the time to bad loan deals they make to people they think they can trust.
For some people the question for large purchases is if it is better to rent or to buy. This includes decisions about housing, home furnishings and even electronic items. The best decision is to usually buy because you get more benefit from it and not a lot of risk as you do with renting. However, in some cases renting may be the best option.
Housing
When it comes to housing you may have no choice but to rent. If you can not get approved for a home loan or you simply can not find a home to buy you may have to rent for a period of time. Your main goal, though, should be looking to the future and an option to buy at some point.
Home Furnishings and Appliances
There are a lot of rent-to-own type stores popping up offering great deals, but renting home furnishings and appliances usually ends up with you losing. They charge outrageous interest rates and you end up paying two or three times more than you should for a product. Many times these products are not even new but they have you paying new prices. It really is best to skip the rent-to-own store and just save up to buy the product.
Not everyone is lucky enough to inherit millions of dollars or suddenly come into a windfall of money. Some people have to build up their fortunes on their own. What is the secret to having what you need and still having money left over?
The secret is actually quite simple. All you have to do is buy only what you need and pass on the things you do not need. Do not give into the temptation to buy just because you can afford to buy it.
People who understand that money is not made just to be spent on frivolous items are people who end up with less debt and more savings. You want to be one of those people then all you have to do is start spending smartly and only buy what you need.
Student loans are something that most people will come into contact with when they are going to college. It is very difficult to get a full ride to college and even more so to get enough grants and other free money to pay for it. That leads you to student loans.
Unfortunately many students are falling into the trap of just going with student loans when there are other options that would not cost them so much. Most students feel, though, that in order to attend college they have to get student loans.
The best option when attending college is to exhaust all options beside student loans. If you are left having to borrow a lot of money it is even worth considering a different college. There is no reason why you should have to borrow yourself into a huge debt.
With the six month waiting period for repayment most students think they will be fine, but this is another trap of student loans. The truth is that most students have not found a good job by the six month repayment mark and repaying those loans puts a huge strain on them.
The deal with student loans is to use them only if you must. Try to find other ways to pay or try to find a college that meets your budget.