The Need To Knows On Bank Loans
Bank loans are good for financing investment in fixed assets such as plant and machinery, land and buildings, to obtain funds for business expansion. Although these loans are usually applied to finance businesses, regular people may also get it for personal purposes such as buying a car or a property, or perhaps to pay for college, or for special occasions such as a wedding.
Banks offer loans to meet many different needs. Bank loans come in a variety of form, and deciding on the type of loan you’ll apply for can be a little overwhelming. Loan types include fixed rate, variable rate, installment, secured, unsecured, and convertible. Each type of loan has unique repayment terms, and understanding those terms can make choosing the right loan easier.
Bank loans can be short term or long term, depending on the purpose of the loan. The bank sets the fixed period over which the loan is provided like three, five or ten years. They are generally charged at a lower interest rate as compared to a bank overdraft.
On top of the interest on the owed amount, other fees and charges may be applicable, depending on the type of loan the lender. Arrangement fees are commitment or administration charges payable to the lender to reserve the funds and to cover opening costs. Interest is charged and will vary depending on risk of default, along with some fees. One benefit of a bank loan is flexibility on rates and fees. Banks offer access to a wide array of terms, fees, application requirements, and interest rates.
However, in most cases, these loans are hard to get because of the strict requirements. Banks make sure that the loan will be repaid, that is why obtaining a bank loan can be challenging. Banks are careful to lend only to businesses and individuals that can clearly repay their loans, and they also make sure that they are able to cover losses in the event of default.
The bank will usually require that the borrower provides some security or collateral for the loan. In the case of a start-up business, this security often comes in the form of personal guarantees provided by the entrepreneur.
Banks normally require a lengthy and thorough application process before they will approve you or your business for a loan. The application process takes a while because of the many paperwork needed. However, a strong application with a solid business plan and good referrals can make you look very appealing to the bank and win you favorable terms for the repayment of the loan.
Banks typically have a lower cost of funds than other lenders because of their depositors. Depositors of banks, which serve as their retail customers, keep a lot of money in their checking and savings accounts. Banks have easy access to those funds to lend out, thus they can offer lower rates than private lenders.
However, some banks see that their main competition, these private lenders have to charge, say 10% or more, they will offer high rates too, although just a little lower than that of the private lenders like 9%. If you don’t want to pay the high rate, banks can still earn a ton of revenue from banking fees or from taking those cheap funds and investing them to earn their 6% or more investments in stocks and bonds or through acquisitions.
Are Bank Loans Direct Lenders?
With the advancement of banking technology, most borrowers can apply for bank loans online through a simple form, either through a broker or a direct lender’s website. A broker is also known as lending network, and a direct lender is a specific bank.
If you apply directly to your preferred bank through an online form, you may receive the bank’s decision within minutes upon submission of your personal details. However, some banks may require you to go to a local branch in person to complete the process and get your funds.
If you are using a lending network or approach a broker, you may broaden your options and apply to multiple banks at once. You’ll be presented with all approved loan offers after your form is submitted. On the downside, feedback may take a little longer than going to a direct lender or bank.
Bank Loans Instantly
If you want to get a loan approved quickly, the best way is to go to banks directly or apply online. You can find many instant loans online. The speed of the loan application and process takes only minutes, which is why it is called instant loan. Online banking can improve the quantity and quality of your loan options too.
With online banking you benefit from the fact that the lenders have lower overheads, so they usually charge less for personal loans. In fact, most of the lowest loan rates around are from online banks.
With banking online, you’ll also be able to phone the bank if you have problems or need to speak to someone about your loan. Another advantage is that you do not have to be in the UK to manage your loan.
Instant loans are growing in popularity because of the convenience and promptness of the service. You can even get your funds within hours from the time your loan is approved.
Are Bank Loans for People With Bad Credit
Credit history is a crucial determining factor for getting a bank loan. Good credit rating has greater chances of a good deal and loan approval. Poor credit can pose an obstacle against favorable loan terms.
A bank can often be a good place to get a fair rate for a loan even if you have a poor credit history. While the exact process will vary depending on which type of loan you need, getting a loan from the bank, even with bad credit, is not as terrible as you think.
When applying for a personal loan with bad credit, you might want to take any loan offered to you, regardless of the terms. However, don’t make this mistake. Even with bad credit, you’ll be surprise to find many banks happy to lend you money, so be sure to shop around when looking for a personal loan or for your business.
The only drawback of bad credit loans is that the rates are normally quite high. This is because of the perceived risk that comes with a bad credit rating.
However, even for people with substandard credit, bank loans can be beneficial to your credit score, provided you pay on time. Successful repayment of bank loans can be used to build up your credit, making you a more appealing candidate for loans in the future.
Bank Loans With A Guarantor
Loans with a guarantor are for people who want to borrow higher amounts of money, but due to factors such as a bad credit rating or because they have no credit at all, they have difficulty borrowing from banks.
Everyone knows having bad credit can keep you from getting a good deal of a loan. However, if you do fail to qualify or are offered rates that are too high for you to handle, you may want to get a loan by finding a friend or family member with good credit to co-sign the loan.
By co-signing, he or she takes responsibility for the loan should you default or fail to make the repayments of the loan, thus reducing the risk for the bank. The person who co-signs your loan is called a guarantor.
With this being said, it is imperative that your guarantor understands the loan terms and conditions completely to avoid any conflict in the future. In case he or she cannot pay the loan too, the bank will take legal actions. This will also mark the credit record of both the borrower and the guarantor.
For a person to become a guarantor, the typical requirements include: he or she must be of legal age or eighteen years old, must have a job, good credit rating, owns a home, and must not be financially related to you.
There are banks that specialize on guarantor loans. These bank loans are usually large amounts of money that are payable over longer periods.
No Guarantor Bank Loans
Banks loans with a guarantor are much cheaper than those without, especially if you have a bad credit. However, if you cannot find a qualified guarantor, you can still get a loan with a good deal.
The majority of banks don’t really ask for a guarantor before they will lend you money. You can get a short-term loan without a guarantor. You may be offered an unsecured loan without a guarantor, but expect that the rates are high.
However, if your loan is over a long period, it may be costly. If you want to have a much lower rate, you can guarantee your loan with any property or collateral. If you have other assets such as property, physical equipment, or stocks, you should be able to get a secured loan.
For you to get a loan, you must be able to prove that you can make regular and timely loan payments, and that the loan amount you are requesting meets debt to income ratio requirements.
Bank Loans in the UK
Searching for personal loans can be a complicated process. In the UK, there are over seventy types of lenders offering personal loans, from traditional banks and building societies to online banks and post office loans.
A bank is a traditional way of taking out a personal loan in the UK, and is still a good idea if you like to go for familiar brands. With numerous types of loans and financing options available in the UK from banks of all sizes, you’ll need to know which option is best for you.
Bank loans in the UK include short-term and long-term loans, secured and unsecured loans, auto loans, home loans, business loans, financing through credit card, letters of credit or acceptance loans, and payday loans.
Long-term debt financing is commonly used to purchase, improve or expand fixed assets of your business such as your plant, facilities, major equipment and real estate. On the other hand, long-term loans for personal use are usually made to cover large expenses such as home renovations, car purchases, and housing or buy a property.
If you are a homeowner and would like to get a loan from a bank, you can qualify for a secured loan. Other collateral allowed to secure a loan can be a vehicle or other valuables such as jewelry. With a secured loan, your promise is “secured” by granting the bank interest on your property used as a security of the loan. If you default on the loan, the bank can regain the money you owed by seizing and liquidating the specific property used for collateral on the debt.
In contrast with secured loans, your promise to repay an unsecured loan is relying upon your creditworthiness and reputation to repay the obligation and not on any collateral.
Although credit cards are not a financing device exclusive to commercial banks, they are often a part of a bank’s lending portfolio. A credit card can be used both by an individual and a business.
Letters of credit, also known as acceptance loans are not the most common means of small business financing, but they are an important financing tool for companies that engage in international trade.
If you want to get the best deals, take your time to compare rates and terms of different banks, and see which one fits your needs best. You can shop around for the loan terms that best suit you and work with the bank to make the deal as sweet as possible.
When you compare loan offers, look at all aspects of the loan, and not only the monthly payment, but also the total cost. Check the interest rate and loan terms to ensure you won’t be paying more interest than you should. Loan terms typically range from twelve months to five years, although the specific terms will vary depending upon the bank, the amount borrowed, and your personal situation.
Ultimately, it is important that you have good credit rating to qualify for you to get good deals in applying for a bank loan. If your credit score is not looking too good, you can still get a bank loan, but make sure you can pay the dues on time. This way, your credit rating will eventually improve.