Finding a Loan

Finding a loan can be difficult if you do not know where to look and how the process works. There are many reasons why you may feel an urgency in finding a loan. It can be very stressful when you need money fast but keep hitting brick walls.

Don’t despair, with the right information finding a loan is not as difficult as you think. Learn more about loan options for a wide range of costs.

What Are Most People Interested in Finding a Loan For?

Lifestyle, to fulfill an expensive need, and for luxury items are the three main reasons that typically, are looking for a loan. Finding a loan for each of these categories is a bit different but very much the same. For example, finding a loan for healthcare costs is the same as finding a loan for a dream wedding, but you will look in different places for a loan.

Finding a loan is possible for just about anything you need or want, however, it is not always the most responsible choice to make. For example, if you need braces to straighten your teeth, and are concerned about finding a loan to afford them, that is one thing. If you are thinking about investing in abstract art and are finding a loan for that it may not be the best choice.

There are Primarily Two Types of Loans

The two main types of loans deliver the same results (you get the financing that you need) but they are different. The secured loan (which can sometimes be easier to get) and the unsecured loan often come from the same sources.

A secured loan is a debt that is “secured” by collateral like a car, boat or house. An unsecured loan or a “signature loan” is not secured by any type of collateral. For example, health care loans, veterinary care loans, or “experience” loans do not have any collateral (something the lender can take back).

Let’s look a little closer at the two different loan types.

A Secured Loan

A secured loan is when the lender holds an interest in the item that they have provided the funding for. A car loan is usually a secured loan, a home loan, boat loan, even a loan for jewelry is a secured loan.

Any time the lender can repossess an item that loan is considered secure. Lenders have an easier time of making these types of loans because ultimately if you don’t pay they can take their collateral back and sell it.

A secured loan can be easier to be approved for because of that collateral factor. The lenders are typically more lenient with the requirements for this type of loan.

The Unsecured Loan

Unsecured loans can be called “personal loans” or “signature loans”. Typically your credit score will be scrutinized closely for these types of loans. The lender does not have much recourse if you skip out on the loan.

Some lenders, however, will never give up the fight if you stop paying on an unsecured loan. They will put liens on everything that you own, go to court and get judgments against you, and take whatever steps are allotted by law to get their money back. An unsecured loan can make it harder for lenders to recoup any losses so it is a higher risk factor for the lender.

Of course, a higher risk factor means that your credit has to be in really good shape to get this type of loan. Consider this, once the vacation is over, the lender has no way of taking it back, unlike with a collateral loan where there is a car or a home to take back.

Other unsecured lending products are credit cards and charge accounts. Unsecured loans are the hardest to get.

Balancing Needs and Wants

Before we get to the nuts and bolts of finding a loan, let’s address the elephant in the room. Balancing needs and wants. Most loans do not come without interest. How much interest you pay on a loan depends heavily on what your credit score ranking is.

That means that taking a loan is going to cost you. You will pay back the principal (the amount you borrowed in the first place) and you will have to pay back additional monies in the form of interest. The longer it takes you to pay the loan the more interest you will pay on the loan.

It is important that you ask yourself before you put in that loan application do I really need to take a loan. Loans should be used for things like cataract surgery or other necessary healthcare, a car, to buy a home, even for those once in a lifetime things like a wedding, but other situations taking a loan is just not the best option.

Sending a kid to arts camp should not require finding a loan. Instead, you can save this year so that they can go next year, no one’s life was ruined for the long term because they did not get to go to camp. Paying yourself is a go way to save for something that you have had your eye on or that you want to be able to afford.

Instead of making finding a loan your go-to source for financing luxury car service, or a great vacation, try paying yourself for a few months and saving the money. Each time you get paid, make a loan payment to yourself. In a few months, the money will really stack up and you will be able to comfortably afford life’s luxuries without finding a loan.

If You Insist

If you need what you need and you need it now, finding a loan can be the best solution. For example, you find great used bass boats for sale and you just cannot wait another year to own one taking a loan may be your only route.

We will use that bass boat you have been dreaming of as an example for the do’s and don’ts of finding a loan. Let’s take a quick look at the do’s:

    • Do shop around for lower interest rates.
    • Do contact the financial institution that you bank with the most often.
    • Do pick the shortest terms.

One of the biggest mistakes anyone makes when finding a loan is settling for the first option that comes along. Interest rates can vary greatly from one financial institution to another. A couple of interest points can make a huge difference in how much money you will payback.

Before you take the financing offer that the dealer has to offer, call your bank and see if they can do better. If you have a long-standing relationship with your bank you may find that they can be very generous when it comes to interest rates. This can be especially true of credit unions.

Another key mistake that borrowers make is only paying attention to what the monthly payment is going to cost them. Monthly payments will be less when you take a longer-term loan, but that interest is piling high, and do you really want to spend the next 5 years paying off your boat?

Now let’s look at the don’ts:

    • Don’t fall into a predatory lending scheme.
    • Don’t forget to read the fine print.
    • Don’t bite off more than you can comfortably chew.

There are prime lenders and subprime lenders for people that have credit problems. Prime lenders are typically on the up and up. Prime lenders will ensure that you understand the loan terms, that the interest rate is relatively fair, and they do not use predatory tactics to loan money to people that will have a really hard time paying it back.

Predatory lenders will charge exorbitant interest rates just under the limits of the law. They will outfit your boat with a kill switch that they can control remotely so if you miss a payment by a day then they can disable the boat. There will be a lot of language that is hard to understand in the contract.

You should read the fine print of every contract you sign and you should ask plenty of questions if you have any. The bottom line does not bite off more than you can chew when it comes to your finances.

It would be great to have that bass boat, but not at the risk of not being able to pay your other bills. Be sure that you will be able to balance your personal finances after you take the loan. It is always better to be safe than sorry.

Where Should You Look for a Loan?

Finding a loan starts with knowing where to look for a loan. Some vendors will offer on-site financing that can make it easier to get a loan, but, do be careful to check with other lending sources to ensure you are getting the best deal.

There are a couple of things that will affect where you should look for a loan. For example, if you are looking for a loan for cosmetic dentistry, your dental office may have specific financing companies that they deal with. Of course, just because they have specific financing companies that they deal with, it does not mean it is a better deal than taking a personal loan from your bank.

Finding a loan for a new car can sometimes be easier if you get approval from your bank. Having approval from your bank before you head to the car dealership can be like having cash in hand. The dealership actually likes these deals better and can often offer more savings.

Of course, your options are limited to your credit score. If you have a great score then you have more options if your score is not so great than you are limited. If you find yourself in the latter group, one of the best ways to improve your score is to take a small loan and make on-time payments.

Finding a Loan With Credit Problems

Up until this point we have addressed finding a loan as if you have good credit, but finding a loan changes when your credit is iffy or worse. There are some solutions out there for even bad credit, but you should keep in mind that you will have to pay quite a bit more out of pocket for a loan with bad credit.

Finding a loan with bad credit can take a little time. Of course, if your back is really up against the wall then take the loan at the higher interest rate and pay it off as quickly as possible, but if you can wait, just a few months, it is worth it.

Unfortunately, finding a loan with bad credit may require that you consider some subprime lenders and deal with the higher interest rates and other restrictions.

Getting your credit score back on track can help you in finding a loan that has a better interest rate, better terms, and will give you more options. The first thing you should do is pull your credit report and look for any errors.

Dispute whatever you think is an error on your credit report with the credit reporting agencies. Then start paying down your debt. Investing in a credit repair service can help to take some of the work out of the process of repairing your credit.

Finding a loan can be difficult when you are struggling with your credit but it’s not impossible. It is always better if you can raise your score a bit before you apply for a loan.