Thursday, February 15, 2018

How to Know Which Loan is the Best Choice for You

Unfortunately, life doesn't come without the occasional need for extra cash due to an unexpected expense. It may be a leaky pipe that burst while you were at work, high medical bills or an engine that quits on your car. 

Whatever the emergency, you need money now. The good news is that whether your credit is good or poor, there are many ways to acquire the money through different types of loans. 

In some cases, it depends on what you need the money for, for example, college costs for your kids or a remodeling project.

Poor or No Credit

The hardest part of having no established credit or poor credit due to late or missed payments is that your options are limited when it comes to borrowing money. 

It wasn't too long ago that you either had to borrow from your family or pay extremely high-interest rates through payday loans. Luckily, today there are lenders such as that base their loans primarily on whether or not you have a job, a checking account and are a citizen. 

This makes it easier to take out a short-term loan with monthly repayment terms, allowing you to take care of the unexpected expense.

A Personal Loan

If you have good credit a personal loan from a bank gives you a way to acquire money to take care of your unexpected expense. This type of loan allows you to borrow $10,000, $20,000 or even $40,000 to cover a major repair. 

Since they are unsecured, there is no collateral required so you won't have to put your home or your car in jeopardy. You can acquire it from either a bank or a credit union and the repayment terms work much in the same manner as a mortgage wherein the payments are fixed and the loan is not open-ended, meaning there's an end date.

Student Loans

The stress of coming up with the money to send a child off to college can take away from their achievements. Luckily there are several ways to acquire the money including a private lender or a federal loan like the Stafford or Perkins. 

The government loans are more popular because there is no collateral needed to acquire them. These loans also have lower interest rates and a deferment period of up to 6 months after your child graduates college before you need to begin repaying the loan. 

Plus, if your child attends multiple schools before graduating, you can consolidate them into a single loan. Private lenders offer student loans as well. Unfortunately, they base their approval on your credit history. 

In most cases, they also have a higher interest rate and there is no subsidizing so you can owe money on a loan before your child actually graduates college. While they do offer deferments, they are limited and less likely.

A Home Repair

If you own a home and have equity in it and need a major repair like a total replumbing job or are in need of a new roof, applying for a home equity loan can help you get the money you need. 

This type of loan allows you to use the equity you have available based on the value of your home in the current market. Since the bank uses your home as collateral the criteria are less stringent than acquiring a personal, unsecured loan so even if you have a few blemishes on your credit report, the chances are better that you will get an approval. 

In addition, other advantages are that the interest rates mirror that of a mortgage, you can borrow a larger amount and since it's a home equity loan some of the interest is tax deductible. 

Another big advantage is that you can use the money however you want to without the need for disclosing it to the bank and thus needing their approval.

Life can throw you curves from time to time. Luckily, whether you have excellent credit or poor credit there are many ways to acquire the funds you need to make necessary repairs, acquire the funds for college or pay off expensive medical bills.

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