An individual, organization or a nation may need to borrow money to cater for particular need. This money that is borrowed is what is referred in other terms to as financial loan. The entity offering the loan in this case is referred to s the lender while the person borrowing the loan is called the recipient. On receiving a finance loan, the recipient occurs a debt that includes principle plus some interest. The debt is paid in terms of installments over an agreed period of time. Financial organizations have procedures followed by loan borrowers before obtaining it but we still have others that offer soft loan where the borrower does not have to provide a lot of information.
Discussed below are things one needs to know about finance loans.
Types of finance loan
Whether you want to start up a business or need some funding for a project, you may need to take a loan. You therefore have to choose one that meets your financial needs. Here are some forms of finance loans you need to meditate over while trying to think about your choice.
Personal loans: These financial loans can be used for any personal expense and do not have a specific purpose. This is an attractive option for many people as they can be used to transfer balances. Personal loan terms are dependent on your credit history.
Mortgage loan: This is a type of financial loan offered by banks to enable you buy homes you cant afford on yourself. The loan is tied to your home meaning in case you default payment, you risk losing the home to the lender.
Fixed rate loans: These finance loans allow a borrower to lock in an interest rate for a particular period of time. The debtor have it in mind that even if the interest rate rises or falls, their interest rate remains intact as per agreement.
Secured loan; For a debtor to obtain this type of finance loan, they have to leverage personal property. In case you default, your property is transferred to the lender. The amount of financial loan that is offered varies with accordance to the worth of borrower’s property.
Open ended loans: These are financial loans that can be borrowed again after the borrower has paid the current loan. A credit card is a good example of open ended loan. On the other hand, we have close ended loans that cannot be borrowed again. In this case the loan decreases with each payment and in case you want more credit, you have to apply for new loan.
Small business loans; small business loans are granted to entrepreneurs who wish to start up a business or expand an existing one. The loans a re offered according to business needs. The borrower is expected to meet some criteria. For example in Kenya, small business loans are offered by government to youths and women and at the same time, one can attains through application in a bank.
listing types of loans is not exhaustible, thus the above gives a general idea of the options that are available. Before taking a finance loan, shop around various institutions to determine which lender offers the best terms of loan, Finally before borrowing a loan, compare the interest rates offered to get the best terms and also pay attention to the type of financial need to determine the right type of loan.