In the world of finance, there is a loan known as a loan. In simple terms, a loan is the lend of money by one or many people, companies, institutions or other entities to others, institutions etc. The borrower is liable to repay the principal sum borrowed and may be liable to pay interest on this debt until it is fully paid. There are various types of loans available for different purposes.
A home equity loan is a loan secured by a borrower’s home in terms of the value of the property. Once the borrower repays the loan, the lender has full right to take possession of the property in the name of the borrower. In order to qualify for this type of loan, the borrower must pledge the equity of the home. A mortgage is another common form of loan which enables a lender to collect monthly payment from a borrower based on the equity he holds in his property.
To apply for any loan, the borrower needs to find out the type of loan that best suits his needs. Lenders have different criteria for eligibility. For example, if a person wants to avail of a personal loan and satisfy the eligibility requirement, he needs to enter into an agreement with the lender. Such an agreement may have several components like the amount of loan, time period for which it is issued, interest rate, and penalty for early repayment. All these components make up the loan agreement.
The most important thing for the borrower who is looking for a personal loan is to find out the lender’s credit requirements. Lenders also have a range of loan products like secured and unsecured. If a person applies for a secured loan, he needs to provide some asset as collateral. This could be in the form of home, car, jewelry, travel tickets or anything valuable. However, if a borrower applies for an unsecured loan, he need not offer any asset to satisfy the credit requirement of the lender.
A borrower can also seek a loan even when he does not have a good credit history. This is called a personal loan under which he gets the benefit of having a better credit history. If the borrower has a decent credit history, he may be eligible for a co-signer or a collateral such as a property owned by the borrower. This way, even if the borrower does not qualify for a secured loan, he may still be able to get one with a co-signer.
Another important factor for the borrower is the loan term or the tenure of the loan. For a person who wants to get a long-term loan, it may be preferable to go for a variable loan term, where he pays a higher amount over a longer duration of time. On the other hand, for people who are looking for a short-term loan term, an introductory loan term of say six months to one year may be more suitable. However, while choosing the term of a loan, the borrower must ensure that he does not borrow more than what he can repay in less than six months. As mentioned earlier, these loans are offered at very low interest rates so borrowers should take full advantage of the offers and make best use of them.