Finantage

Loans

At some point in life a person will eventually chose to take out a loan. This can be a major life changing decision such as buying a home, getting your first car or going to school. It could also be something as simple as getting a loan to buy furniture or recreational equipment. Regardless of what the borrowed money is for, it is important to understand as much as possible about the loan before making the commitment.

What is a loan?

A loan is an advance of money from a lender to a borrower with the promise that the borrower will pay back the money plus a fee for the amount of time they got to borrow that money. The other important thing you need to know about when it comes to getting a loan is interest. Whenever you borrow money from a bank or other institute you will be charged a fee for the amount of time they must lend you the money for, this is called Interest. The longer it takes you to pay back the loan the more interest you will have to pay.

A loan is a legal and binding contract between the borrower and the lender. There are two types of loans secured and unsecured. A secured loan is backed up by some sort of collateral like a car, home, boat or any other form of equity. Almost anything of value can be used as collateral if you can prove that you own it. Unsecured loans do not have any type of collateral to back them up.

Secured loans and how they work

To get a secured loan you need three things:

Some type of ownership document that proves the borrower owns the collateral. This can be a car title, a savings account statement, a real estate deed, a bill of sale; basically anything that can show that you are the owner of the item you are using as collateral.
You need a note or a type of document that states that you promise to repay the lender and lists the terms and conditions of the loan, this is the contract.
The last item you need is a security document. This document shows that they lender has a security interest in the collateral that you have offered.

How to get a loan

Anyone that is at least 18 years old can get a loan. Before you dive in and get a loan from just anyone it is important that you shop around. You will want to compare different financial institutions before you decide to see who has the best interest rate. You will want to get at least three quotes before you commit to a certain institution. You will want to do this for any type of loan you may be trying to get.

The next step is applying for the loan; be truthful on your loan application and only provide the information that they ask for. You application and your credit score is going to determine if you are eligible for the loan, how much the interest rate will be, and how much you can borrow and how long you can borrow it for.

The final step of getting a loan is of course, making the payments on time and every single month. If you get behind on your loan you will be charged late fees, your credit score will take a hit.

Specific loans

Specific loans that you can get are car loans, mortgages, and personal loans. To get any one of these loans you will follow the same basic steps. The only difference will be the length of the loan, the cost, interest, and the monthly payments.

Getting a loan does not have to be scary or intimidating, everyone asks for money in some point in their lives and banks have special departments that deal with just that.