Whether for buying a car, renovating a house, or educational purpose, or any other purpose, loans can help to achieve your goals, immediately. In the course of this article, we shall endeavor to look at the various types of loans offered by banks, and how to go about making an application for one.
So what exactly is a loan? A loan is a debt instrument, which commits the borrower to payback the amount borrowed (also known as the principal), regularly in installments, over a particular period. The loan is generated by the lender at a cost known as the interest. There are the different categories of loans, which banks will typically offer. They include:
1. Secured Loans: In this type of loan the borrower will pledge some assets(s), such a piece of land, or a car, as collateral for the loan.
2. Unsecured loans: With this type of loan, no collateral is required from the borrower. This type of loan is offered by banks in different variations, such as credit cards, personal loans, bank overdrafts, etc.
3. Demand or Payday loans: They are typically offered by banks for relatively short periods (often no exceeding 180 days). They do not have any fixed dates for repayment, and carries a floating rate of interest, which varies according to the prime rate.
So how can you go about making an application for a loan? Here are some handy tips which you should look at, to get you started:
· Banks will often assess your risk by your financial stability, to determine whether you qualify for a loan. If you are employed, you should ask your employer for a letter confirming your employment. If you run your own business, you should be able to produce some financial records, confirming your ability to pay back the loan.
· Building a relationship with your prospective lender, and find out their terms and requirements for the loan.
Tips and comments:
Always read through the terms and conditions stipulated for the loan, and make sure you are able to comply with them, before signing “on the dotted line”.
