Finding a loan was never easy. The condition only worsened after the recession of 2008 started. The global economy is marked with record-making unemployment rate and fear of increasing inflation in people’s mind. Under such circumstances, finding any loan and making sure it is the right one is difficult. In order to secure a good offer, it is critical that you understand what options you have.
Many people do not even recognize the various types of loans that are available. This article will guide you through a few loan solutions and help you understand how you must select one based on the following:
- What you need the loan for
- What your current financial situation is
- The type of job you have
- Your income levels
Broker Loan
Even though this type of loan is not advertised so often, it is true that brokerage houses often provide great loan deals. You can borrow as much as 50% of the value of the bonds and stocks you have in your account, if you open a margin account at a brokerage house. You will basically be using your portfolio equity as collateral for the loan. There are also lender who approves and funds personal loans completely online.
A disadvantage of this loan type is that if your portfolio declines in value, you might be required to add more money in the account. This is known as margin call and many people find themselves in tricky situation because of this. It is essential to remain careful at all times.
Credit Union Loan
If you join your company’s credit union, you can take advantage of it by requesting low-cost credit in times of need. Many credit unions actually allow members to enjoy loans at 2% to 4% lower interest rates compared to the usual commercial rates. You may find that this type is easier to repay, as the payment is part of the company you work for. You can arrange for a payroll deduction system so that company can deduct a certain amount automatically each month. If you are someone who does not like handling bills, this may be ideal for you.
Home Equity Loans
With recent housing market meltdown, it became difficult for many people to get home equity loans. If you have more equity built-up than regular homeowners, this might be a feasible option for you. Interest rate for this type of loan are quite low. In fact, it is lower than ever now.
Loan Against Pension Plan
You may also apply for a loan against your pension plan. Keep in might that pension plan loans often come with strict limitations. Some of them come with longer repayment possibilities. It is recommended to take this loan if your intention is to buy a new house. Keep in mind it is not ideal to use this money for vacation houses or other expenditure, which could be easily avoided. The pension plan trustee sets the interest rates and it is generally kept around the normal prime rate.
Credit Card Balance Transfer Loan
Credit card balance transfer check or loan is when your credit card allows you to make advance payments from your account for a fee of 3% or more.
A disadvantage you may face is that these are given for a very short period. After the initial term of 6 to 9 months, the interest rate overwhelmingly augments to 20 or 30%. Be sure to check all terms and conditions before you settle for this type of loan.
Each of the loan types are different and you must assess properly before selecting one.