No matter how smart you are at managing your finances, there will come a time when you would need a bigger amount of money to take care of some important expenses, whether they’re planned or unplanned.
It could be that bill from the hospital due to an accident or that house you’ve wanted to buy for the longest time. No matter what your expense is, getting a loan could be your best choice to raise the funds that you need. Here are four of your best options:
- PERSONAL LOAN
A personal loan is a practical option if you need cash to use at your discretion like paying for an emergency expense, consolidating debt or a home improvement project. This type of loan doesn’t require an asset as a collateral and depending on your arrangement with the lender, you can pay it in fixed monthly installments. If you’re planning on getting a personal loan, here’s what you should know:
- It has a fixed amount.The amount of money that you can borrow in a personal loan will depend on your credit rating, your income, your existing debt and of course, your lender’s discretion.
- It is more difficult to get.Personal loans have stricter requirements than credit cards because they don’t require an asset to use as a collateral.
- It has fixed interest rates.The interest rate of a personal loan will be based on your credit rating and it stays the same throughout the life of your loan. If you have a good credit score, the lender will give you lower interest rates.
- SIGNATURE LOAN
The difference between a personal and signature loan is that the latter requires someone’s signature as collateral. Also known as a character loan, this option is good for general expenses that require more money than what you have in the bank. Here’s what you should know about signature loans:
- It requires good credit history.Since there is no real collateral for this type of loan, lenders will look for a solid credit score and good income to let you borrow money.
- It may require a co-signer.Some lenders may require another person to sign a promissory note to support your loan. In the event of non-payment, the lender may call the attention of the co-signer.
- It is a one-time loan.Unlike a revolving account like a credit card, a signature loan is considered close once the full amount and interest is repaid.
- CAR LOAN
Getting a loan to buy a car has become a practical choice for many. Since a car is one of the biggest investments you will make, a loan will help you cover the expenses of your purchase and repay them in installments for a period of time. If you’re thinking about applying for one, here’s what you should know:
- It is highly dependent on your credit score.Experts suggest that you apply for a car loan within a 2-week period to protect your credit score from decreasing.
- It’s smart to use a car loan calculator.This will help you determine if you can afford to make the monthly payments for your car. It will also help you save money in the long run.
- It’s important to get pre-approval.Before you start shopping, get a pre-approval from your lender so your dealership has more confidence in your purchase.
- HOME LOAN
There is no doubt that buying a home is the biggest purchase of your life, and you need to make wise choices about financing it. A home loan helps you ease the financial burden of investing in a house, but you need to know these things before getting one:
- Its amount depends on several factors.This includes your age, continuity of employment, income, credit history and repayment capacity.
- It doesn’t cover the entire cost of the home.Lenders will not give you the full amount of the home you want to buy. Instead, they will cover 75-85% of the total cost and leave the rest of the house value to you. So, be prepared to shell out some money for a down payment.
- It requires a collateral.Lenders will ask you to provide a collateral for your home loan to be approved. It could be an existing asset, a life insurance policy or a guarantee from 1-2 individuals.
Which of these loans fits your needs best?