Loans are funds that an entity lends an individual or organisation. The money is ideally expected to be repaid at an agreed time. With the banking institutions being an integral part of the society, there have sprouted different types of loans over the years. Here are some of the funding options available in the market.
This usually is a personal credit that one is given to use for their benefit. An example is buying a TV, renovating your home, or building a fence. A vital characteristic of this type of funding is that it doesn’t require any guarantor or collateral to be able to qualify for one. Collateral is the asset one places on the line in case they aren’t able to pay.
These are the opposite of unsecured loans. The cash generally requires some security guarantee, i.e. collateral to be able to be approved. Assets like title deeds, car log books and stocks are usually used as collateral.
These are normally short-term loans which bear a high interest. They are given to people that have been employed. They are generally due on your next payday whereby the lender automatically withdraws the amount as soon as your salary reflects.
A pawnshop loan is usually an amount lent when you take a priced item to a pawn shop and exchange it for money. You enter an agreement with the lender on what interest rates you are going to pay back the money with and the date you intend to pay. Then when you come back with the money, you are given your item, and if you default, the item is sold to recover the lender’s money.
These are lent funds that get disbursed through your mobile phone. They have gained popularity in Africa’s ongoing tech boom. They usually operate by giving borrowers small amounts with relatively high-interest rates. If you default you are listed with credit boards in that, you cannot acquire any other loan before paying the one you previously defaulted on.
A cash advance is a temporary loan against your credit card. Rather than utilizing the credit card to make a purchase, you can take it to a bank or ATM and receive funds for whatever purpose you need.
Loans are a double-edged sword that may cut deep if you are not keen on paying back on time and also may help you grow your business. Be sure to be a smart borrower and a quick payer. Also, take note that different countries embrace different financial principles. Thus, they may not be uniform across the globe.