People borrow money for various reasons: for fulfilling daily needs, for purchasing things, for financing college tuition, for paying mortgages, for starting a business, and so forth. The amount of money borrowed is also varied, starting from a few hundred to many thousands of dollars. Different needs of money borrowers have instituted several methods of money lending. Three of the most common methods of borrowing money are loans, overdrafts and credit. How should each one them be used for getting proper and effective money lending? Keep reading short descriptions below.
Loans
Loans consists of four major types; secured, unsecured, and Credit Union loans, and Moneylines.
– Secured loans
With this method, the borrower should surrender security to the lender prior to borrowing money. The security may be in the form of assets or other valuables. When the borrower fails to keep up with the payments, the lender has the right to force the sale of the secured assets or seizure the assets as has been written in the loan agreement. As this method is less risky than an unsecured loan, secured loans are commonly cheaper in terms of interest. This kind of money borrowing is mostly suitable for borrowing huge amounts of money over a long term, for instance for home improvements.
– Unsecured loans
This method does not require you to surrender any security, hence giving greater risk to lender. Due to that reason, unsecured loans commonly have higher interest rates, shorter repayment terms and more stern rules. Penalties may occur if you fail to repay after the maturity period or even if you attempt to repay the loan before the maturity.
– Credit Union loans
This loan is regulated by financial organizations. The loan is provided by and to the members of the organization. Commonly, members of the Union share similarity so that they can bond into an organization. The similarities may include workplace, housing territory, membership in a certain association, and so forth.
– Moneylines
This method is provided for unfortunate people who face difficulty in finding financial institutions around their area. The moneylines are managed by the community to provide loans for people in undeserved markets and remote areas. The money lent may be used for working capital, business purchases, start up capital, home improvements, property and equipment purchases or personal loans.
Overdrafts
You will need a bank account to have an overdraft. This borrowing method allows you to borrow money up to certain limit when your account has no money in it. This is surely an advantage for overcoming short-term cash flow problems. This money borrowing method is flexible as you can repay the debt when it suits you. However, overdrafts are better used for short-term loans with small amounts of money, as the interest rates of overdrafts are generally high.
Credit
Another method to borrow money is by purchasing on credit. Using a credit card or other credit arrangement, you can pay for goods or services in installments. With credit payment, you can get better protection for larger purchases, acquire instant gratification, simplify travel plans and build a solid credit record. However, this method also has some issues such as irresponsible spending, interest payments, credit score issues and penalty risks.
Before deciding to borrow money [http://www.borrowdale.net/], make sure you have chosen the most appropriate method in order to avoid bad credit. Learn more about money loans [http://www.borrowdale.net/] by visiting our page.