A Guide To The Various Types Of Loans

We all need finance at some time or another, buying property, cars, or paying for things we need now. The world revolves around money lending and always has, and in our capitalist society, there are many ways a person can borrow money, from a short-term personal loan to financing a film, and here are just a few of the loan types available today.

  • Secured Loan – is a low-risk loan. A secured loan has an asset that is put up as a guarantee, and should the borrower default, the said asset becomes the property of the lender. The asset would typically be real estate, and, of course, the market value of the asset would be greater than the loan amount. Lenders like secured loans, as the risk is minimal, and should the borrower default, the lender receives the asset.
  • Unsecured Loan – A personal loan would normally be unsecured, meaning there are no assets involved, and the lender takes the borrower on face value. The lender will determine the borrower’s risk factor by checking their credit history, and if you would like a personal loan, go to https://www.debtfix.com.au/bad-credit-personal-loans, who are Australia’s leading online loan provider. The process is really simple, and most people receive preapproval within 5 minutes, and in most cases, the funds are in their account by the end of the day.

  • Open Credit – The credit card system is a form of loan, whereby the card holder has an agreed limit to which they can make purchases, and the card holder pays a monthly figure. Credit cards do offer a temptation to overstretch yourself financially, and some people quickly find themselves in deep debt, which grows as the interest accrues. Paying the credit card at the end of the month can leave a person with no cash, and, of course, they use the card, and this cycle can continue for a long time.
  • Bank Overdraft – If a person has a good relationship with their bank, they might have an agreement whereby they can withdraw up to an agreed figure when their account goes into the red. It might be set at $5,000, and the account holder will use this facility if they choose, which is one way the bank makes a profit. This would certainly not be automatic, rather the account holder would have to request an overdraft facility, and the bank would review the account history and make a decision based on their findings.

There was once a time when borrowing money was a lengthy process, with at least one meeting with the bank manager, yet we now have online loan providers who offer competitive rates and a very fast application process. Once you are on their website, a few clicks and you are literally minutes away from receiving preapproval, and the funds are usually transferred into your account within a day or two.

Lending money is all about risk, and the lender has access to a database that contains information about a borrower’s past credit history, and this will determine whether or not the loan application is approved.

 

Leave a Reply

Your email address will not be published. Required fields are marked *