Loans are an important financial tool that comes in handy when money is needed but unavailable. Loans can be used to purchase a car, personal items, electronics, investments or even a home. Loans can also be used to clear debts or pay for items that are needed. So when cash is not readily available but is needed in substantial amounts, then it is important that a loan is considered.
There are various types of loans available to borrowers, the preference of which will depend on the intended use, amount sought, interest rate charged and ease of access. A common type of loan is a payday loan. A payday loan is a cash advance that is made available to people who have an immediate need for cash but do not have it handy. The cash advance is provided with the hope that it will be refunded using the paycheck proceeds of the applicant on pay day. To qualify for this loan, the applicant only needs have a regular source of income, such as derived from employment, a bank account and a valid identification and residential address. This loan normally charges high interest rates as it is unsecured and does not undertake any credit history checks.
Most loans require that the applicant has favorable credit ratings. This means that the borrower has a history of paying back any loans or credit advanced to them. Many financial institutions shun people with bad credit ratings. The reason is simple. The bank or other lending firm doe not want to lend its finances to people who might not be willing to pay it back. Having a good credit report is absolutely important when it comes to borrowing a loan.
Another important factor that is beneficial when asking to take out a loan is having a job or other source of regular income. A regular source of income basically guarantees the lender of the borrower’s ability to repay the loan, including other charges, fees and interests. Employed people, business owners and others with a regular source of income all stand a good chance of borrowing from financial institutions.
Having equity, assets, property or large amounts of cash and other liquid assets will stand a person in good stead when it comes to borrowing. Banks and other lenders will look favorably at people who own such assets. This is is good for two reasons. Assets may be required to act as collateral for the loan. Most lenders usually prefer assets as security for loans. Owning assets is therefore, very important when it comes to borrowing loans from financial institutions.
Holders of credit cards may want to pay off the balance on their credit cards before applying for loans. This is because this will improve their credit ratings and improve their credibility in the eyes of banks. People with good credit ratings can borrow larger amounts at lower interest rates.
Finally, lenders may also look positively towards people in stable families. For example, a married person is considered more responsible and is more likely to repay a loan granted to them than their unmarried counterparts.
