A small, short-term loan proposed to cover an individual’s expenditure until his next pay is termed as a payday loan. These loans assure a safety net when individuals suffer a financial crunch and help them meet their emergency requirements. These loans have the advantage of being easily applied and are also known to have a simple and quick procedure. This helps in saving the time of both, the lender and the borrower. These payday loans are also known to be sanctioned promptly with no lengthy procedures.
All pending loans are paid off through consolidated loans. These loans are secured loans and hence require some sort of an asset like a house or a car to be pledged as collateral security. The striking feature of this type of loan is the low interest rate which makes individuals worry less as he is required to pay off only one debt at a time. These loans are also used to pay off credit card debts.
Loans that are issued to finance construction projects are termed as construction loans. These are short term loans which are financed by the mortgage on the property being financed. These loans are repaid with the help of the cash generated by the property completed. The defining feature of such a loan is that the principal amount borrowed needs to be repaid once the construction is completed and the interest charged is paid during the construction process.
Debt Consolidation Loans
A loan that pays off two or more loans is termed as a debt consolidation loan. The striking feature of this loan is the lower interest rates along with longer repayment period. These loans have an advantage of tax benefits. Individuals are allowed to gain tan benefits from the interest of the loan. This process is often used for student’s loan. If an individual wishes to increase is credit availability, then these loans are a good move.
Loans that are obtained by the borrower from the lender purely on his creditworthiness and goodwill and not on any collateral security are called unsecured loans. Due to the high involvement of financial risk the lender must have full information regarding the credit rating of the borrower and also have full knowledge regarding his previous loan repayments. In an unfortunate case of bankruptcy the creditors have no claim what-so-ever over the assets of the borrower. Therefore, a full scrutiny of the borrower must be to ensure his credit worth.
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