Do You Need Fast Cash? The Pros and Cons of Personal Loans

If you need fast cash, a personal loan is an option. You also need to worry about repayment and interest rates. Here are the pros and cons of personal loans.

Money problems keep 65% of Americans up at night.

Stressing over money isn’t only unpleasant, it’s dangerous too. Your body reacts negatively to high levels of stress. Cardiovascular disease, high blood pressure, depression, anxiety and more can all result from chronic stress.

Instead of worrying about paying your bills, maybe you’re considering getting a personal loan. When you use them correctly a personal loan could be the answer to your financial problems.

However, if you don’t use the loan correctly, you might end up in a worse situation than you began with.

We wrote this article to clearly define the pros and cons of personal loans. Read on to find out what the best choice will be for you.

Pros and Cons of Personal Loans

Before we explore the pros and cons of personal loans, we’ll explain how a personal loan works. These types of loans have fixed monthly payments. Usually, you will receive the money from a bank, credit union or online lender.

Annual Percentage Rates

Your lender rates can vary depending on the institution where you get the loan. You can expect a rate that falls anywhere between 7% to 36% Annual Percentage Rate (APR). The total interest you’ll pay along with extra charges create your APR.

Qualifying Factors

Lenders will qualify you for the loan using several different factors. One of the things they’ll be looking at is your credit score and credit reports. After they review your credit score, lenders will want to see your credit to debt ratio.

The better your credit the lower your rate will be. When you’re credit score is below 600 it’ll be difficult to find any lender. If you have a very low credit score, and you do find a lender, the rates will be extremely high.

Compare Rates

Before you choose your personal loan, you should do some shopping. Find a reputable company to help you with the credit review. Compare rates from different vendors and find the one with the lowest APR.

Be careful as you’re shopping that not every lender is running your credit score. You want to limit the number of times an institution runs your credit. Excessive credit checks will affect your credit score.

Now that you understand how a personal loan works, let’s look at the pros of getting one.

Pro: Personal Property Stays Safe

One of the best personal loan advantages is the peace of mind that you’re property is safe. A secured personal loan will not require you to back it with any type of collateral.

If you default on your loan you won’t have to worry about losing your assets. For example, other loans might require you to place your house or car as collateral.

In the event you can’t pay off your loan, the lender would get your house. You never know when a major life event will prevent you from making a payment. However, with a personal loan, you’ll know that you and your loved ones will always have a place to live.

Pro: Simple Application Process

Next, you’ll enjoy being able to conveniently apply for a personal loan. In the past, the application process was extremely tedious and difficult.

However, with the ability to use an online vendor, the application and approval process can take less than 24 hours.

Within a couple of days, you can have all of the money you need.

Pro: Consolidate Debt

Finally, your personal loan is helpful in consolidating your debt. If you have different types of debt, like credit cards, a personal loan could be your way of refinancing.

The Federal Reserve shows personal loan rates are going down while credit card rates are going up. The average personal loan rate averages around 9.7% while credit card rates are averaging close to 14%.

If you have a lot of credit card debt, you could get a personal loan to repay it. You’ll save money because you’re interest rate will be considerably lower. While 9.7% is the average rate for personal loans your rate could be as low as 6%.

The state of your credit, of course, will determine if your rate is closer to 6% or 9%. Once you’re debt free you can start building your financial future.

Now you know more about personal loan advantages. Next, we’ll explain the potential disadvantages of receiving a personal loan.

Con: Budget Concerns

Emergencies are usually the reason people apply for a personal loan. The urgency of needing the money right now is the guiding force behind their decision. You put your finances in danger if you buy a loan without reviewing your budget.

Before you agree to any loan, find out what the monthly payments will be. If the payments don’t fit in your current budget, don’t get the loan.

Con: Origination Fee

Interest isn’t the only expense your personal loan will carry. You’ll also be responsible for paying the origination fees. The processing of the loan costs the lender money so they charge you origination fees.

Normally the fee will range between 1% all the way up to 6% of the amount you’re borrowing. When you take out the loan you’ll have to pay the origination fees up front.

This can be especially upsetting to individuals who are tight on money. Having to pay a bill right away with the loan money received can seem counterproductive.

Con: Scams

Beware of all the scammers out there waiting to take advantage of you. Not every loan offer you’ll receive will originate from a legitimate source. Usually, scammers will offer you a fake loan to get your personal information.

Once they have your personal information you’ll be at risk for identity theft. Other scammers will even ask for an upfront fee to secure the loan.

After they receive the fee they disappear into the night. This scam even has a name, it’s called the “advance-fee scam“.

Guidance on Your Financial Journey

The pros and cons of personal loans will be different for every individual.

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Should I Get a Personal Loan? 6 Signs It Might Be a Good Idea

If you’re wondering; should I get a personal loan? Then this blog article’s a must-read. Click here for more info and see whether it’s the right choice for you!

Should I get a personal loan?

If you’re asking yourself that question, you’re in good company. From medical emergencies to car repairs to consolidating debt, millions of Americans are turning to personal loans as a solution.

In fact, a staggering 83 million people–or 34% of Americans–have taken out a personal loan in the past year.

That’s great for them, but what about you? Is taking out a loan the best way to handle your unique financial situation?

Here are six things to consider before you take out a personal loan.

1. What Are You Using It For?

Personal loans are classified as unsecured debt, which means you don’t have to put down any collateral to get it.

The good news is that most personal loans offer a lower interest rate than credit cards. This makes it a great choice for consolidating and paying off high-interest credit card debt.

If you’ve fallen on hard times due to medical bills, unemployment, or other factors beyond your control, this could be a viable way for you to get back on your feet financially.

Still, caution is needed. Lower interest rates might tempt you to take out a personal loan to finance a luxurious vacation or an expensive piece of jewelry.

Don’t do it! Debt is debt–and a personal loan is no exception. If you regularly get in the habit of buying high-ticket items you can’t afford, it’ll take more than a personal loan to bail you out.

2. How’s Your Credit Score?

Assuming you have legitimate reasons to take out a personal loan (not for a trip to Tahiti), what are some factors to consider?

A major one is your credit score. Lenders need to know that you’re trustworthy before they’ll give you money for any “personal” reason.

Think about it this way. A lender can repossess your car or your house if you fail to make payments, right?

But what happens if you fail to pay back a personal loan? Short of sending you to collections, there’s nothing they can physically take to repay the loan.

The better your credit score, the more trustworthy you appear to lenders. That’s not to say it’s impossible to get a personal loan if you have poor or average credit. You’ll just have to pay a higher interest rate for it.

3. What Are the Repayments Like?

Unlike a 40-year mortgage or other long-term loans, personal loans are generally capped at seven years.

That means that whatever amount you borrow, you’ll need to repay it in seven years or less (with interest).

In a financial pinch, you may not have much of a choice. But let’s say you’re taking out the loan to finance a large, expensive project, like a major remodel on your house.

How much will you need to pay back every month? Do you earn enough or have enough savings to cover the monthly payments? If the payments are too high, you could easily fall behind–and fall into even more debt than you started with.

If you’re unsure how much you need to borrow or what your monthly payments might be, a loan calculator is a good place to start.

4. Who Are You Borrowing From?

If you have a good working relationship with your current bank, that’s a great place to apply for a personal loan.

But banks aren’t the only option out there. Many credit unions offer personal loans with better interest rates and lower fees than major banks.

In recent years, online marketplace lending has also been a popular source for personal loans. It’s basically a digital “matchmaking” system that pairs borrowers and lenders quickly and easily.

Whichever avenue you choose, be sure you’re borrowing from a reputable lending company. The internet can be a powerful tool to get you the cash you need, but there are also plenty of loan scams out there.

5. Have You Considered Other Options?

A personal loan may be the best option for you–or it might not be.

Before you send in your application, make sure you’ve considered other viable financial paths.

For example, some people seek out personal loans to consolidate higher-interest student loans. This sounds great on the surface, but what are you giving up? Many student loans come with federal benefits or loan-specific protections that you’d lose by refinancing.

What if you’re trying to consolidate credit card debt? Shop around for a new credit card that offers a promotional zero-percent interest rate on balance transfers.

You might also consider borrowing from a Roth IRA or retirement account to temporarily cover your expenses. If you do, just make sure to pay yourself back when your finances stabilize.

6. Does the Loan Come with Hidden Fees?

Before you make any final decisions on a personal loan, be sure to read all the fine print.

Many lenders try to sneak in an insurance policy right before you sign a deal. They may even say it’s legally required for personal loans (it’s not, by the way).

If you choose to add such coverage to protect your family from a financial burden, that’s fine. Just make that decision because you’ve researched it and thought about it, not because you feel pressured.

Another question to ask the lender is if there are any penalties for paying off the loan early. If your financial situation improves quickly and you’re able to pay off the loan ahead of schedule, wouldn’t that be a nice option to have?

Should I Get a Personal Loan? Final Thoughts

As you can see, there are pros and cons to taking out a personal loan.

Because every financial situation is unique, your best bet is to weigh your options and make an informed decision.

Of course, “Should I get a personal loan?” isn’t the only important question to ask. To get (and stay) out of debt, you need to get in the habit of making smart decisions with your finances.

Click here for our latest insights into smarter ways to handle your money.

6 Things to Consider When Applying For Your First Loan

You should be educated when it comes to applying for your first loan. Follow our guide so you can easily understand and get through the process.

As of December 2017, all debts in the United States totaled a whopping $13.15 trillion. Mortgage loans top the list at $8.88 trillion, followed by student loans at $1.38 trillion. Auto loan debts rank third, totaling $1.22 trillion.

These figures show how dependent we’ve become on consumer loans. After all, they allow us to make huge purchases like homes and cars. Most of us don’t have the cash to pay for these all at once.

But this doesn’t mean a lender will approve your first loan application right away. That’s why it’s important you know what to consider before taking out a loan for the first time.

Don’t worry though, as we’re here to help educate you. Keep reading to learn about first-time loans and what you can do to boost your approval chances!

1. What Type of Loan Are We Talking About?

What exactly do you need the money for? That’s the first and most important consideration when taking out your first-ever loan.

Unless your goal is to become a home owner, then you most likely only need a personal loan. As the term suggests, this loan product is for personal expenses. That could be to cover moving expenses, medical bills, or even buying a car.

In the U.S., most people take out personal loans for debt refinancing or consolidation. As many as 55% of borrowers said they took out a personal loan for this purpose.

But you don’t have any “debt” to consolidate or refinance in the first place, do you? So, it’s possible you need money to pay for moving-related expenses.

What’s more feasible, though, is that you need it to cover medical bills. After all, out-of-pocket medical expenses now average $1,813.

But what if you need a loan to start a business? In that case, consider a business loan for startups.

Not all business loans are only for startups. Your business can also benefit from other types of loans, such as in the case of growth and expansion.

The point here is to determine if your need for a loan classifies as an emergency. Or in the case of a business loan, if it’ll benefit your organization in the long run. If that’s the case, then a loan may be your best option.

2. How Much of a Loan You Need

Once you’ve determined you do need a loan, next is to figure out how much you need. If you have enough time to save up some money, then it’s best you take that into consideration too. That way, you’ll take out a lower loan amount, which means paying less towards interest.

3. How Much You Can Afford to Pay Back (with Ease)

This is much trickier than determining how much you need. When figuring out how much you can afford, you need to look at your finances – both inflows and outflows.

Let’s say you earn $25,000 a year, which is the typical salary of a 23-year-old American worker. That’s about $2,080 every month.

Now, deduct your fixed expenses (like rent or fixed-rate utility expenses) from this. Make sure you don’t forget about your variable expenses (AKA electricity and water bills, transportation, grocery, etc.). It’s also a good idea to set aside something for emergencies or better yet, for savings.

Look at what’s left and compare that with your potential loan payments every month. Is the former greater or less than the latter?

4. Your Credit History

A common misconception is that people who have no loans don’t have a credit history. This isn’t always the case. If you have a credit card under your name, then you’re one of the 220 million U.S. consumers with a credit file.

But what if you also don’t have a credit card?

Don’t worry. There are still loans that you can get even with only a prepaid debit card. These loans, as well as payday loans, are a good option if you need access to funds as soon as possible.

It’s still a good idea to start building your credit history ASAP though. That’s because if you pose the question, “What do you need to get a loan?” to traditional lenders, they’ll tell you a good credit score is one of them.

A good place to start is with secured credit cards and student credit cards. Many credit card companies issue these cards to people with little to no credit. Once you qualify and start using one of them, you’ve already taken the first step to building your credit.

This is one way of figuring out how much you can afford to pay back. It’ll also help ensure you have enough to prevent even more financial setbacks.

5. Your Credit Score

Say you already have a credit history, thanks to your rent or credit card. In that case, you need to know where your credit score stands.

Lenders look at your credit history and score to determine your creditworthiness. If you fare well in both, then they’ll take it as a sign you’ll pay back what you owe them. So, the more impressive your credit, the more chances you’ll have of securing your first loan.

But only knowing that you have a good credit history and score isn’t enough. You have to make sure that it shows up on paper too. That’s why it’s best to request a copy of your report to make sure there are no errors in it.

6. Loan Terms

Loan terms vary from lender to lender, from interest rate to payments to other typical fees. That said, make sure you understand everything before signing the dotted line!

One of the most important terms of the loan you should know is the annual percentage rate (APR). That percentage will tell you of the actual cost of your loan every year. It’s different from the interest rate, since this only goes towards the interest you’ll pay every month.

Also, be on the lookout for loan origination fees, late fees, and failed payment fees. Some lenders also charge prepayment penalties, so that’s another factor to consider.

Better Understanding of Loans Increases Your Chances of Securing Your First Loan

Taking out your first loan doesn’t have to be a nightmare. It does require effort on your part though. Especially when it comes to building credit from scratch and comparing loan offers.

But so long as you consider everything in this guide, you can improve your chances of loan approval. As a final reminder, once you do get your loan, maintain healthy spending habits.

 

The Numbers Behind It: What Determines a Loan’s Interest Rate?

Nearly everyone need loans to sort out some financial issue at some point. The problem can be funding for impromptu emergencies. Some will prefer to take credit to fund their wedding or even birthday parties. But before you apply for the loan, you must check the set criteria for one to follow. Some of the reviews are discussed here.

Before you apply for a loan, you must check to gauge the best lending company you will go for. This may include their interest rates, registration fee, loan tenures among other things.

Interests

Interest is the extra cost you incur while repaying your loan. Interest is calculated depending on various factors like amount of money you borrow from them. Good lending firms will reduce the interest rates as you advance on the money borrowed. Therefore, the lower the amount, the higher the interest rates. So, before taking any loan, it is advisable to look for the firm that offers the least interest rates.

Some firms may increase the interest rates depending on the loan tenure. Short term loans tend to have higher interest rates. Big firms like the local banks may give a credit of as low as 10$ interest per year.  So, before taking any loan, ask this question, how long is it going to take? Respond by reviewing and choosing the best lender.

Research reveals that most small-scale lenders offer soft loans. This type of loan in most cases is very costly. Their advantage is that loan processing is very fast. You can sit in your office, apply online and within minutes, you’ll find money in your account. Be careful before taking this tempting money. You can inquire more on interest rates on sites like https://loanreviewhq.com/lender/lendingtree-review/.

Loan tenure

Some banks will give loan rates in line with the duration ranging from one month up to ten years and beyond. For example, student loans the interest rate will increase as you delay in payment. The truth is that all interest rates increase with time and the earlier you pay, the better.

Good loans are calculated annually. Loaning bodies that lend money on a weekly or even monthly basis are not worth going for. The total amount paid to let us say after one year is huge.

Registration fee

Avoid firms that require you to pay some fee for loan processing. What if you are not granted the loan? Because they determine whether or not to provide you with a loan. Secondly, going for a loan means you are desperate for money right?  Good lenders will advise you to open an account with them. This is right. The amount in the account may act as security in case you want an unsecured loan.

 

Penalties

Sometimes things may not always work your way. What if you default to repay on time? What next. Before settling for the best lending firm, check their terms of service and steps that are taken to claim defaulted loans. Don’t go for the firm that will carry all your belongings to the auctioneers.

Bottom line

It is right to take a loan and settle your immediate financial issues. But before deciding on the best lending firm, carry out a thorough review of the firm. Make sure you answer questions like what are their interest rates? How long do they take to process and give out the loan? Do I need to pay anything to be given the loan?

The Disadvantages of Short-Term Loans

Short-term loans have been the shortcut to business financing for startups and small business that are in desperate need for business growth. During times of cash shortage, short-term loans have proved effective as it is easier to get and repayable within a short-term period. Even though this type of loan seems easy and is preferable due to its nature, it can also have disadvantages like high cost payment per month, borrowing cycle risk, early repayment penalties, and unsustainability. These disadvantages means that interested individuals should be careful while requesting for short-term financing.

High Cost Loans

Short-term loans always come with a high monthly payment and this can affect business profits as a bigger amount of money is required to pay off the debt, more than what is required from long term loans. It also affects the cost of a project as the short-term loans used for it incur high interest rates. Ensuring that money is budgeted to pay off these short-term loans is vital so as that no negative effect on the business happens. When settling on a business choice, it is critical to evaluate the circumstance, as no two circumstances are precisely similar.

Borrowing-Cycle Risk

Due to this loan being easy to obtain it can turn you to a regular borrower. In the event that repayment of an initial short-term loan is impossible, borrowing again might be considered to balance off the original loan, leading to a series of loans, which traps you and your business in a high-risk borrowing cycle. This risky process leads to inefficiency in businesses operations and it is advisable not to depend on short-term loans seasonally, as it has bad side effects on business productivity.

Early Repayment Penalties

Some lenders impose a contract that limits the repayments of loan at a specific period to profit from the loan. In some cases, repayment of loan at an earlier time than agreed might lead to high repayment penalties as the lender loses profiting due to early repayment. This prepayment penalty compensates the lender and leads to high costs and penalties to the loanee’s credit.

Unsustainable

Dependency on short-term financing is considered bad due to its unsustainability on the long run. Even borrowing from a list of reputable lenders is not good enough. Small businesses or startups are all geared towards making profits from their operations. It is wise to access your business operations if you find yourself constantly taking loans to cover business expenses. If your business is not being productive it would be best to find other business opportunities other than taking short term loans.

At the end of the day, the decision rests on you to decide which direction your business takes when it comes to financing for business growth. Short term loans or long term loans also has its advantages but thorough assessment of business direction and determination of what is required for business growth and improvement will help guide you on the quest to a successful business operation and increased productivity.

The Top 3 Tips for Shopping for a Hard Money Loan

When people hear of the term “hard money loan”, they often think of loan sharks and shady dealings. But that is not the case nowadays. There are many trustworthy and legit companies like Maggio Capital Inc. – San Diego, CA that aim to help those people who are not able to qualify for bank loans.

Since there are so many hard money lenders, you should be careful in choosing the one that will truly assist you. Here are some tips to follow when looking for a lender.

  1. Check to see if any of your friends can recommend one to you – the first step you can do is to interview any of your friends or colleagues if any of them had ever gotten a hard money loan. You don’t have to just ask them for the company they got the loan from. but the whole process itself. Every company has a different way of processing their loan applications, and you want to be prepared with whatever documentation you have to pass. Then, ask them if they will be able to recommend their own lender. Get feedback on how the service was and of course the rates that were given to them.

 

  1. Do your research on what hard money loans are – before getting yourself a hard money loan, you will first need to understand what it is. Don’t go blindly into an agreement with first doing your homework and understanding the basics. Know what the difference is between a hard money loan and why it is different from traditional lenders, like banks. Simply put, a hard money loan is a short-term loan secured by real estate. Instead of banks, you will be funded by private investors and the loan term is shorter compared to traditional loans. Unlike in banks where the applicant’s credit rating is the primary concern of the lender, for hard money lenders, it’s usually the value of the property that they consider. So you should arm yourself with information on the industry standards and the types of property that you can use a hard money loan for. Some of the examples are fix and flip homes.

 

  1. Compile a short list of the private lenders you are eyeing and do your background check on them – even with recommendations from friends and family, it would still be a good idea to keep a short list of potential companies that you can go to for a loan. You should watch out for red flags in order to avoid . the shady dealers who might not be giving you the best deal. Schedule a time of consultation with them and ask them the process. You can tell that a lender is trustworthy when they can explain to you every step in the process so that you can understand what will happen. If a lender will not tell you right away the specific cost and fees when you ask them, and if they evade your questions, it would be best not to deal with them.

Fast Money with Auto Title Loans

Quite often, we are faced with financial troubles that need fast solutions. It may be an emergency medical bill that we need to cover or pay for the car repair in order to keep driving it and doing our job. Some of the traditional methods for getting money may not work for you because they take too much time or because you have some issues with your credit history that can prevent you for getting a loan.

In such cases, you can count on getting a quick auto title loan using just your vehicle as a collateral. If you have not used this option so far, here are a few details that you need to know.

Why an auto tile loan is a good solution for your unexpected financial problems

A car title loan can help you solve your financial problems especially if they are unexpected. The main advantage of this type of loans is that they are very quick – you need to fill in a few details online and you can get an approval in about 30 minutes.

There are not so many requirements or documents that you need to meet or present in order to get the loan, so it really doesn’t take up too much of your time. As per the law, there is also a minimum amount that you can receive against the title of your car, which in California, for example, is set at $2,600, while the maximum can be up to $50,000 even. It all depends on the condition of your car, its current resale value, etc.

An auto title loan is also the best, and often the only solution, in case you need money but you have a bad credit history. The auto title loan company will not turn you down based on this factor. Quite often the company doesn’t run a check on your credit history at all or even if it does, it is just for information and does not affect the final decision.

How to apply for an auto title loan

If you want to apply for an auto title loan, you need to know that the process is quite simple and straightforward. The most important thing is to have the title of your vehicle on your name and that it is free from any other liens against it. Then all you need to do is fill an online application form and wait about 30 minutes for the result. Some companies also offer the option for the clients to visit them personally – they have locations often at big shopping centers where you will be served also very quickly and professionally.

The other documents that you need in addition to your car title are:

  • Valid ID
  • The car documents such as insurance, registration, etc.
  • Current utility bill as a proof of your residence

Note that it is very important to be resident of the state in which the auto title loan company operates and that you should be 18 years of age.

Most of the companies also require that you have fully repaid your vehicle but some will grant a loan even if you are still repaying the leasing.

The good thing is that even though you use your car as a collateral for the loan you still keep it and can drive it. Another plus is that you can use the title of your motorcycle, RV, or truck as well. Keep in mind, though, that the lender may also require a photo of the vehicle or even a visual inspection in order to determine its condition and hence the amount that you can receive.

As you can see, getting an auto title loan is not difficult and is generally hassle-free. It has many benefits as the fact that it is fast and doesn’t run a credit history check on the person who needs it. One of its main drawbacks is the higher interest rate, however if you repay it on time, that won’t cause you any problems. And remember – don’t be shy when you apply for the loan and make sure to negotiate the best conditions that you can get – that often includes lowering the interest or getting no penalty for pre-payment.