Saving up money for a large purchase or huge expenses is a perfect financial plan but isn’t always possible. Particularly for expenses such as college education, unexpected emergencies, and purchasing a car or home, among others. When in this situation, you may consider applying for a loan.
So, what should you consider before deciding on which loan type to pick;
Loan Interest Rates
Financial institutions like banks offer loans at different interest rates. However attractive an interest loan may seem, it’s good to do research and shop around; who knows, you might come across a better offer. You can visit the institutions or use financial websites for detailed information before making a decision.
Loan Charges
As you focus on interest rates, remember to consider fees and charges associated with different loan types. The extra charges include late payment charges, processing fees, service tax, and loan cancellation charges, among others. Banks charge differently, its therefore important to weigh available options.
Pick an Affordable Equated Monthly Installment (EMI).
Once you receive a loan, you must pay it back, no matter the situation. It would be best if you had a rough idea of the equated monthly instalment for these reasons before settling for a specific loan type. You have to be sure that you can pay your monthly instalments accordingly and on time.
Consider Repayment Flexibility
Some loans repayment terms and conditions are pretty rigid, while others are flexible. For instance, you might be charged a small fee if you want to pay off your debt before the tenure ends. Pick a loan and a lender that charges a small fee if you intend to clear your loan and avoid future interest payments.
Loan Types
There are different types of loans available; you must pick the one that suits your needs the best. Below are examples of loan types that you can apply for;
- Payday Loan
It is easy to find payday loan and it’s also a perfect option if you need money urgently. It’s a short-term loan whose principal is a percentage of your next payment. It’s also called a cash advance. The amount you receive depends on your earnings, and you are expected to submit a payslip when making an application. The best thing about payday loans is that they aren’t credit-based, meaning you can get one even with bad credit.
A payday loan attracts very high-interest rates, finance fees, and other charges. If you cannot clear the loan on your next payday, you can rollover the debt. However, you will have to be subjected to more fees and pay much more than you would have paid the first time.
- Cash Loan
A cash loan will do you good if you instantly need a small amount of money to cover financial emergencies. These emergencies could be a car repair, home repair, or purchase of a washing machine. Other loan types might not be the best in these situations because of the minimum amount you can borrow and the prolonged loan application process.
Your lender will deposit money instantly in your bank account after a successful cash loan application. You must, however, be ready to pay back the amount borrowed plus interest on time. Since a cash loan is instant, the interest rate might be high.
- Same Day Loan
The same-day loan can be a lifesaver in case of a financial emergency. Perhaps you need to clear a hospital bill, repair your car, or your utility bill came in higher than expected. If you don’t have enough savings, a same-day loan will cover the expenses as you look for money to pay back.
In most cases, same day loans are online and automated to speed up the application process. Money will be disbursed the same day or immediately after your application is approved. However, they come with high but reasonable interest loans. If you are sure that you can pay back on time, then go for it. They are a variety of options for the same day loan. Discuss with your lender on the better choice.
- Emergency loan
An emergency loan covers emergency expenses. There are different emergency loans, but most are short-term and come with high fees and interest rates. You can quickly get an emergency loan even with bad credit.
Your lender can offer an emergency loan with a lower interest rate if you have a good credit history.
- Personal Loan
You don’t need security or collateral to acquire a personal loan. Your lender can approve your loan application with minimal documentation. Its repayment plan is usually in monthly installments.
You can use a personal loan to fund almost any expense, including medical expenses, weddings, travel, home renovation, or even day-to-day expenses. You can get a personal loan with a low-interest rate and a perfect repayment plan with a good credit score.
Conclusion
Before choosing the right loan type for you, it’s essential to think about your current and future financial situation. While loans are an excellent way to get you through financial crises, remember you have to clear the debt. Only borrow an amount that you can pay back comfortably.
