Each one of us needs a loan!
Millions of people around the world have been interested in taking out a loan at one point or another in their lives. We all agree that money is never enough! That is why we leave the house each and every morning to go out to make more of it. So sometimes when the money isn’t enough, and there is a pressing need that has arisen, then you shall find yourself taking out a loan in order to settle it. Probably you want to start a business. Not many people are able to start a business without utilizing a loan facility to provide the capital. You either have to save up for a while or you look for investors to get the requisite capital required to start your business. Mortgages have given millions of people around the world to have an opportunity to own a home. Mortgages are a sort of loan product and are very popular and enables families build or purchase homes. Sometimes you may take out a loan in order to pay back a debt or an overdue bill. Payday loans are very popular especially in the internet when we find there is some “month” left at the end of your money. There are millions of reasons why we could take out loans and one time or the other we shall find ourselves taking a loan.
The definition of a cheap loan.
Unlike many things, cheap loans are the best loans available. You have heard the saying that cheap could be expensive. But because the product you are seeking is money and it is not possible to get “low quality money” so to speak then, getting the best rates… rather the cheapest rates are the best rates. There are some things that could make you to consider a loan to be defined as a cheap loan.
- Low interest rates.
Interest is the amount paid back for a loan over and above the principle amount you took out as a loan. It is calculated at a certain predetermined rate stipulated when you are taking out the loan and accumulates on a monthly basis. It is common sense that if you were to choose between a loan that attracts a ten percent interest rate and the one that attracts a five percent interest, the one that attracts the 5 percent interest rate is the best loan option of the two. In fact the amount paid back in interest shall be roughly half especially if the loan provider is using simple interest as the formula to calculate the amount owed.
- Shorter repayment periods
Interest rates are calculated on a monthly basis. For each month that passes, you pay more. The longer the period of time that you hold on to a loan, the more the amount of money that you shall have to pay back when all is said and done. There are stiff penalties that are levied against loan defaulters who go beyond the stipulated loan period. The bottom line is this; the longer the time that you hold on to someone else’s money thee higher the amount you shall have to pay back. So even if it means that you pay back the loan before the stipulated time, you shall pay much less. You may be asked to pay some form of penalty for this but it shall be cheaper.
- The loan type
Some loan types are considered cheaper than other loan products and others are considered to be more expensive. For example payday loans are unsecured loans with a short settlement period. They are considered due upon your next “payday”. They thus tend to attract a steeper rate of interest than other loan types. Unsecured loans are more risky to provide for loan providers. They have no fall back position if a client fails to honor their end of the deal. They thus tend to place a steeper rate of interest as a form of insulation should loan takers fail to settle the loan on time. If it was a secured loan, should there be a default in repayment of the loan, the asset provided as security shall be disposed of to recover the principle amount. It is basically a more risky loan to provide. Hence the increased risk shall be demonstrated in the rates charged to settle them. So if you have an asset that you can provide as security then you can be able to source for a cheaper secured loan. However you should be ready to pay back the loan in a timely manner or you might end up losing the asset.
Cheap loans and debt.
Millions of people across the world are making monthly payments to settle one loan or the other. Some people have so many loans, that loan consolidation services are becoming more and more popular even across the internet. This enables you to pay back a certain sum and not have to pay into multiple accounts. Even the best loans have one big disadvantage; they dig you deeper into debt. Payday loans have sunk so many people into debt! Once you start you cannot stop! Before long, after taking out a payday loan, you shall find yourself taking out another loan to pay for an overdue monthly installment. This is the beginning of all your financial problems. Statistics show that if you take out a payday loan today, a couple of months down the line you shall owe about twice the amount you are borrowing today. Let me give a little piece of advice. Even if loans are cheap, avoid them like the plague! Credit card debt is also on the increase. It is a type of loan as you are basically taking a loan from the credit card company. According to Natalie Mac in “Undergraduate students and credit cards in 2004: An Analysis of usage rates and trends”, 76% of undergraduates have credit cards…they will amount to $20,000 in student debt! According to the federal reserve bank of Boston, credit card debt per household in 2010 amounted to $15,799. These are very depressing statistics indeed. You may think that credit card is one of the cheaper ways of taking care of payments but make sure that you are careful about your spending. If you are taking out payday loans or other shorter term loans, to take care of bills, then do not get too attached to the habit. Avoid taking out loans!
Planning- the only way to get out of debt.
Many of the loans people are taking out today can be avoided. Many of the people in debt need not be there. If you can plan your finances properly then you need not source for a cheap loan each time an unexpected bill arises. Have no illusions, all loans are expensive… yes even cheap loans. At the end of the day you are taking out a hundred dollars to pay back a hundred and twenty dollars a few months down the line. In this economy where every penny counts, if you can find a way of avoiding that extra twenty bucks expense then the better for you. How do you do this? It basically comes down to such a simple but very important thing as putting together a monthly budget allocating some money for the bills. Pay your bills before you put aside your entertainment moneyJ. Also have a rainy day account. Make sure that you deposit a certain sum into that account on a monthly basis in order to bail you out of a tight financial position. Maybe you may have a medical bill to settle and your insurance refuses to cover it. Instead of going to get a short term loan you could pay it off from the account. Thus this shall save you a lot of money and peace of mind. Also avoid unplanned purchases at the mall that tend to set you back and could lead you to take out a cheap short term loan.
Where to get a cheap loan.
Having said all that, sometimes you may be in a tight fix and you may need a short term loan to bail you out. Where can you find a cheap loan? You may head over to your local bank or financial institution. Find one that provides the best rates and more favorable terms of repayment and you may borrow the amount from them. There are also some online options where you can get fast approval and the amount can be deposited into a bank account of your choice in under twenty four hours. There are so many options and it is important to do a little “loan window shopping”.
“Loan window shopping”
It is important to look around before you decide to choose a loan provider. Different loan providers stipulate varying rates of interest and more favorable terms of repayment. So it is important to look at what your options are and choose the best option. It could save you a few bucks!
Final remarks.
Loans can never be cheap! As I have said before, you are paying more, for less money. That is not cheap! So if you can, try to keep away from taking out the loan. But if you are in a tight position, ensure that you get the best rates possible. Even after taking out the best and the cheapest loan out there, ensure that you make payment your number one priority to avoid sinking yourself into a never ending debt cycle.
