For a million and one reasons, there is a need to borrow money at one point, or another, it’s so common, in fact that, it’s kind of what makes the financial world go round. If you’ve never borrowed money, then you might not have a credit history making it harder to get future loans for big things such as a car, a home, or a new business. As strange as that may sound, here is why it makes sense to apply for a loan and get yourself on ‘the ladder’.
Credit Checks
As mentioned above, if you’ve never taken a loan out before, then you might find it more difficult when it comes to borrowing money when you really need it. When you apply for a loan, nearly all lenders will go through a credit check process, to assess your ‘credibility’, and to learn more about what kind of financial risk, if any you may pose to them, as a borrower. If you’ve never actually had any form of credit (money loaned) before, your ‘credibility’ will be somewhat unknown, and you may need to provide the loan company with some kind of collateral reassurances. That could be your car, business, or home, in fact, it could be anything that you, or your business own, which is equal to, or more than the loan amount itself.
Different Types Of Loans
Following on from above, there are really only two types of loans that may be available to you, although they may be called something slightly different, or dressed up in a different way. Essentially, you may have the option of unsecured business loans. An unsecured business loan will generally be for anybody that has a good credit history, or a lot of money in the bank, which will be attractive to a lender because, number one – they can be reasonably well assured that if you have a good credit history then you will be more likely to make your payments each month, and they won’t need to watch your account so much. Number two – is that, if you have a sizable amount of money in the bank then, again, they can be reasonably well assured that, if you don’t make your payments, there will be money available for them to go through a process of claiming the money back through the appropriate channels.
Interest & Early Settlement
Something to bear in mind is that different companies will have different offerings, some unsecured business loans may offer really low interest rates (interest being the money they charge on top of the loan amount), and no early settlement fees whereas others may have high interest rates and penalties for missed payments, or early settlement.
Bear in mind that, if your loan has interest applied to it, then the interest is spread over the term of the loan so, it makes better financial sense to the lender for you to borrow the money for as long as possible, if you settle early then they won’t make as much money hence early settlement fees. Every company will be different though, so make sure you have a good look around before agreeing to anything.
