Do you have an urgent financial need and you are looking for ways to finance it? Have you checked all the options within your reach yet none is enough to sort your problem out? Then getting a consumer loan may just be the way out.
Consumer loans are any credit that is granted to individuals for different purposes. It comes in two forms: secured and unsecured. With these credits, an individual can cover personal and small business needs.
There are different financial institutions or lenders that offer billige forbrukslån (affordable consumer loans) and this makes it important that you go for the best. We recommend that you make proper research before going for a lender as that will determine your lending experience.
What other important information about consumer loans should you know about? Let’s start with the types of consumer loans available.
Types of Consumer Loans
The following are some of the different types available to consumers:
Mortgages
This type of credit is used by consumers to buy properties or houses. Many homes are very expensive, some cost more than an average person earns per annum. This is why people choose to get a mortgage loan. By getting a mortgage, you can own the property of your dreams.
A mortgage is a secured loan so it requires collateral. Borrowers will have to pledge their property to receive the loan. So, in case, the borrower defaults on paying back the mortgage, the lender can claim the property. The repayment term for this loan takes up to 30 years.
There are different types of mortgages available. Here are a few types to consider:
Variable Mortgages
This is also called the adjustable-rate mortgage. The rate of interest on this mortgage can change periodically and this makes it affordable only for a short period.
Fixed Mortgages
The rate of interest remains the same throughout the loan duration. This makes the mortgage more affordable than other types.
Car Loans
These credits are used in getting vehicles. The duration for car loans ranges from 2 to 5 years. Like mortgages, car loans require collateral. Borrowers will use their vehicles as collateral to get these loans. The consequences of not paying off a car credit can be serious, as many lenders require that the credit is paid together with late and asset fees.
Personal Loans
These types of credit are very versatile than other types of consumer loans. Unlike a mortgage, auto and student loans that serve a specific use respectively, personal loans can be used for different purposes. You can borrow it to pay off debt, go for a vacation or make a purchase. The duration of these credits depends on their purpose.
Personal credits can be secured and unsecured. Unsecured personal credit does not need collateral to get them. But they come at a higher interest rate than the secured ones. One popular use of this type of loan is to pay off credit card debt. Since these loans are affordable, one can easily get them to balance off debts.
Student Loans
This type of loan is granted to students while in school. Students can get these loans from the government or private financial institutions. Many students prefer federal credit because it comes with a fixed interest rate. Also, the loan does not have to be paid till they graduate from college.
There are two types of government loans. They are subsidized and unsubsidized. The subsidized type is reserved for students that have financial needs. The federal government pays the interest on these loans for the students. The unsubsidized is available for any student regardless of their financial situation.
Some students prefer to take student credits from a private financial institution. The rate on this credit depends on each students’ needs. Sometimes, the rate is slightly lower than what federal credit offers. This is why some students prefer to get them. The credit limit for this loan varies from one lender to another.
Where to Apply for Consumer Loans
Now that you are familiar with the type of consumer loans available, it is only fitting to know where you can get them. Here are some of the places to find them:
Commercial Banks
These are the primary lenders of these types of loans. The banks offer credit to borrowers that can repay them. They mostly give out secured loans with a low-interest rate.
Credit Unions
These are non-profit organizations that help people with similar credit interests. They usually provide consumer loans with better interest rate terms than commercial banks. This is because many lenders under the union agree to offer a subsidized consumer loan to their members.
Consumer Financial Institution (CFI)
This institution specializes in giving out personal and refinance loans. Borrowers who do not have a credit history can get a loan without collateral. CFIs can also borrow money to people with poor credit score, but the interest rate on the loans are higher and comes with risks. CFIs process the loan application faster and you can get the money the same day after applying.
Pawn Shops
Pawnbrokers offer secured loans to their borrowers. They collect collateral and lend out money based on its value. When you balance off a loan on time, you can get your asset back. If you fail to pay back, the pawn lender will sell the collateral.
Pawnshops charge high-interest rates than the other lenders, but they do not require any application or ask questions like other lenders.
Life Insurance Firms
A life insurance company allows you to collect up to 80% of the money value in your life insurance policy. Sometimes these loans are not mandated to be repaid, but the debt is subtracted from the remaining amount of money your family receives when you die.
How to Get a Consumer Loan
The following are important steps to follow if you want to get a consumer credit:
Know Your Needs
Surely, you will not like to take a consumer loan that you cannot pay back, so determine the amount of money you need. Keep in mind that there might be some fees to pay to the lender. Some lenders require an origination, appraisal and processing fee before giving out a loan. So before applying for a consumer loan, find out if the lender charges for such fees.
Know Your Credit Score
Many financial institutions check your credit score before they give a loan. This is done to be sure that you can repay the debt when it is due. A good credit score opens an opportunity for you to get loans with low-interest rates, but even with a poor credit score, you can still apply for a loan. The rate of interest of the credit is very high so try to improve your credit score before applying. For helpful tips on how to improve your credit, click here.
Consider the Type of Credit Available
There are secured and unsecured consumer credit available. You have the choice to choose the one that fits your needs. Secured credit needs collateral before you can get the loan, while unsecured doesn’t.
You can also get a loan based on duration. There are short and long-term options. You can choose your preferable term based on the credit use.
Look for a Reputable Lender
Take your time to find the best lender available. You can get consumer loans from credit unions, banks and other financial institutions. You can also find lenders online. Some lenders allow you to get loans even with a poor credit score but this comes with risks. Compare the different types of lenders available and choose the right one for you.
Choose Your Preferred Lender and Apply
After making the necessary research, choose the lender that has the best loan offer. Some lenders accept an online application, others require you to come to their bank or union office. Each lender will ask you for some basic information like your name, home address, contact, financial status and income range. Be willing to present this information during the application process.
Accept the Consumer Loan
After reading through the application fine print, you can choose to accept the loan or not. Some lenders will send you the money within 2 to 3 days after you applied. After receiving the money, start making plans to repay the debt. Create a repayment budget and stick to it.
Conclusion
Now that you have understood what consumer loans are, it becomes easy for you to choose the one that meets your needs. It is important to make the necessary research on different loan offers available. Doing so will help you make the right choice.