Ara Betty is a freelance financial writer and speaker about personal financing. She helps people realize their goals on becoming debt free with the use of debt consolidation. She hopes to expand her knowledge more about loans and debt to be able to write a book.
Online Loans Facts
If you were to look at online loans, you will quickly find out that there are so many different kind of loans. Some loans will sound like they are almost the same and some loans will be completely different.
You need to know what kind of loan will suit your needs before you take one out. You don’t want to get the wrong type of loan because you did not know any better. To help you avoid making such a mistake, here is a list of some common types of loans.
Check out the differences and see which one is best suited for you.
Secured Vs Unsecured Loans.
All loans will have one of these terms, but what do they mean? Here is a quick rundown on what the difference is.
When you get a loan, this will be the most commonly used type over unsecured loans. This is because a secured loan has a lot more safety for the lender, and depending on how the repayment is handled for the borrower as well.
Therefore when you apply and get approval for the loan, you will be required to put down some form of collateral, usually in the form of property such as your home or your vehicle. If you stop paying off the loan, the collateral will be claimed by the lender as compensation for your lack of full payments.
For certain loans such as auto financing loans, they will take the car that you got using the money from the loan.
Unlike secured loans, unsecured loans do not require any collateral to be placed down when you get the loan. This makes it rather risky for the lender though, because there won’t be a form of compensation for them if you default on your payments.
This is why it is more uncommon to find unsecured loans when you are getting a loan, however some lenders will still offer them. If you find one, there is a high chance there will be a high interest rate for it.
It might be difficult for you, but if you don’t have an asset as collateral, then getting an unsecured loan might be better for you.
If you are looking for a way to get money into your bank account right away, then payday loans are what you need. Payday loans, or cash advances, are a super common loan that many people get when they are in need of money for emergencies.
This is because you can get a payday loan the same day that you apply for it! All you have to do is go through the application process, which usually just takes a couple of minutes and wait to get notified if your loan is approved or not.
Typically, you get notified if you are approved by a lender within the day. Some say that they got approved within minutes after submitting the loan application. You can usually get the cash deposited into your bank account as soon as possible.
You will also be able to use the money after it has been in your account for a few hours for whatever you please. This whole process can be completed in just one day compared to traditional loans that have a longer processing time.
They are also called cash advances for a reason, because most lenders will expect you to pay them back within a month. Therefore, you should try to make sure that the cash advance that you are applying for will fit within your next salary or can be covered by then.
Otherwise, you do not want to end up with even more debt than what you had originally started out with prior to taking out the payday loan. Keep in mind to check what the interest rate is before you get the loan to see if you can pay it back within the given amount of time.
What are the Differences Between a Direct Loan and an Indirect Loan?
Another important detail to know is what the difference between a direct and indirect loan or financing is. You will see these terms being thrown around a lot while you are doing your research on loans. However, it is an important thing to know about when you are getting a loan.
Here are some details about direct lending and indirect lending.
Direct lending or financing is the more direct way or simpler way of getting the loan. The entire loan process of applying for the loan, getting the loan, discussing the loan terms, etc., will just be between you, the borrower, and the lender.
There should be no other party involved, which can be more convenient if you want straight answers and no confusion. If you are trying to get an online installment loan, getting a direct lender to finance you is very common.
While direct lending involves only the borrower and the lender, indirect lending involves a third party. Take a car dealership for example, you can apply for a car loan there. They will be considered as the third party who will be responsible for looking for a lender and getting you the loan.
Depending on the loan and what your credit situation is, they might extend their credit towards you. What you should expect is that the third party will be handling all the ins and outs of the loan.
By knowing what types of online loans there are, you will be able to make sound decisions when you apply for a loan.