While looking for an emergency loan, you need to read the fine print before you close the deal. Emergency loans are usually purchased for things like medical emergencies, unforeseen last-minute expenses, personal loans, auto loans, and a range of other problems and situations for which you don't want to get a dedicated loan. Moreover, people look for these loans in haste because these are usually situations that cannot wait. Especially in the case of emergency medical loans or in the case that someone needs money to cover the costs of a lawyer for a legal problem they are in, there is great urgency in the situation. The person taking out the loan is usually willing to pay a slightly higher price just so they can get the money as soon as possible. Lenders are aware of this weakness and even though it won’t be very prominent, they will try to profit as much as they can from this situation. If you are looking for an emergency loan these are some of the most important things that you want to keep your eye peeled for.
1. The Minimum
The first thing you want to have a look at is the minimum amount that a lender is willing to give to you. In many cases, an emergency loan doesn't have to be very large. Sometimes you are only short by a few hundred dollars yet the minimum loan amount is over a thousand. In this case, getting the loan is actually going to cost you more than what it is worth. After all the interest and all the associated fees are going to be calculated according to the value of the loan, not how much you are actually using. Try looking for an option that meets your needs or one where there is less than a 10% difference between your needs and the value of the loan.
2. Credit Requirements
Even though there are many lenders in the market today it can still be tough to find loans for people with bad credit. However, if you do your research right, you can find a number of options that give excellent solutions, even for those that don't have the best credit score. These lenders realise that bad credit is sometimes just the result of an unfortunate series of events or unfavourable circumstances. If you aren't finding the right solution, keep looking; there is no reason to settle for an expensive loan.
3. Annual Percentage Rate (APR)
The APR is the combined cost of the interest rate as well as the fees and any other costs that are part of the loan. The problem is that while the interest rate might be low when you look at the overall APR, it can be quite high. In fact, for small to medium-sized loans, it is not uncommon to see APRs that actually cost more than the loan itself. You want to pay extra attention to this part of the transaction and carefully study how the APR is structured to understand exactly how much you are going to be paying to use this money.
4. Repayment Term
Emergency loans come in all shapes and sizes and the payment options are just as diverse. There is no need to get caught up in a tight schedule. If you explore your options you can easily find loans that give you several months or even years to pay back the amount. Even though the shorter payback periods will be cheaper, it is more manageable to have a loan that isn't pushing you to repay. The additional cost is worth the convenience.
5. Collateral
Usually, short-term loans don't require collateral but if you want to get the best services it is best to have some kind of collateral ready. Generally, those that use collateral are better priced and have more flexible payment options than unsecured offerings. However, you also need to consider the consequences of a secured loan in the case that you are unable to pay it back in time.
6. Time To Fund
The whole purpose of an emergency loan is that you get the capital in your hands as soon as possible. Some are literally instant where you meet the lender and walk out from that meeting with the cash in your hand. Others can take a couple of days or even a week while some can take multiple weeks or even more. If you need it urgently make sure the time to fund is as quick as possible.
7. Fees
Lenders can come up with all kinds of ideas when it comes to getting the client to pay them more money in return. Things like origination fees, processing fees, management fees, collateral management fees, and the list go on. Usually, those that offer a fantastic interest rate and also promise you will get the money quickly will charge for this premium service in some other way. Without ever letting you know, you will be paying more than you need to. In some cases, the fees can really make it difficult to repay the loan so be sure to read the fine print.
Final Thoughts
Getting an emergency loan is all about thinking smart and finding something that meets your needs. When you go into the market for a loan, everyone wants to sell you something that will benefit them, not you. They will attract you with all kinds of offers and will try to lure you in by not disclosing the entire amount that you have to pay back. Instead, they will focus on how quick it is to get the money and how you shouldn’t ‘worry about it'. Make sure you check the market before committing to service and ideally have a professional assisting you in finding the best solution for your problem.
A low Annual percentage rates (APR) loan is almost always provided to people whose credit score is excellent. You can easily do a lot to improve your odds of getting a low interest rate by reversing your credit damage. Besides your credit rating, there is very little left to get any bank loan with a low-interest rate.
In the following paragraphs, we show you four tips for improving your credit history if it's not good.
1. First Things First
(Image source: a3papersize.org)
Boost your credit score. Low Annual percentage rates loans are usually provided to applicants with stellar or high credit ratings. To improve your credit rating, remove as much of your financial obligations as you possibly can and repay what you owe in a timely manner. Also, steer clear of making too many credit enquiries. Every time, you make your credit enquiry by applying for a credit card or loan, it ruins your credit track record.
2. Submit an Application for Loans Using Collaterals
Unsecured loans have high interests’ rates even if you have a good credit rating. Therefore, in order to get a low Annual percentage rates loan, consider getting a personal loan as an alternative. For instance, you can use the car title as collateral. Normally the value of the security must be comparable to the particular amount of loan you want to acquire. Secured loans generally come at lower interest rates than unsecured loans. If you are getting confused with the interest rates on personal loans, you better try www.Zmarta.fi to compare the options from more than 25 banks and lenders in your area.
3. Using A Co-Signer
The next tip of a low Annual percentage rates loan is to get a co-signer. This is actually known as co-debtor. You can ask your family member (spouse, parents or sibling) who have a good credit score to sign the loan with you. Once you have a co-signer, loan providers consider their credit history before deciding the interest rate at which they give you the loan.
The Annual Percentage Rate will be lower in case your co-signer has an excellent score. Make sure that you don't go delinquent on your loan because if you do, then your co-signer will be responsible for making payment on the rest of your loan and the interest. Besides, it'll adversely affect his / her credit score so be aware of this.
4. Essential Cost Comparisons
There are different loan companies with different interest rates. So, try to do some essential price comparisons using loan comparison sites. Once you have compared some loan providers, make contact with a couple of them and ask for an offer. They'd take the details you provide and determine the interest rate and monthly payment, and send you all you need to know on that loan. You better opt for the one with the lowest Annual percentage rates. Stick to the tips above, and within 6-12 months you will see your credit rating start to improve.
The UK Car Finance market has grown aggressively over the last few years, fuelled in part by innovation and a growing ability to serve the sub-prime market.
Car-buyers have a number of options now available to them if they’re unable to be a cash-buyer – including Hire Purchase, Personal Loan and the newer Personal Contract Plan.
But flexibility on purchase options is only part of the reason for the strong growth in the market. Car Finance companies have also embraced technological innovation to help them broaden their market into the sub-prime sector – i.e. those customers who have an impaired credit history and won’t be able to access finance from the high street banks at their leading rates.
The sub-prime lending market has always been eyed with both desire and caution by finance providers – on the one hand the sub-prime market offers the ability to charge higher rates of interest, on the other hand, the sub-prime borrower market, by its very nature, carries with it a high risk of default. Get the model right and a lender can make handsome profits, get it wrong and the bad debt rates can force a lender out of business.
The car finance market is slightly different to the personal loan market in that during most of the finance arrangements available, the finance company technically retains ownership of the car so can repossess the vehicle if things go wrong with the loan repayments. Traditionally though that was easier said than done – finding the car when the borrower knows the loan has defaulted may be tricky.
The introduction of technological solutions have helped finance companies not only track and locate vehicles but also ‘encourage’ the borrower to keep up the payments under their finance plan.
Immobilisers are often fitted to vehicles, particularly those financed in the sub-prime sector – i.e. those that present the highest risk of the borrower not keeping up the repayments – and they’re clever pieces of kit. Every month when the finance payment is made the borrower will receive a unique pin code to enter into the immobiliser. Fail to make the payment and enter the correct code, the immobiliser will kick in and the car won’t start. What’s more, the Immobiliser will also act as a tracking device making it much easier for the finance company to repossess the vehicle.
So at a stroke the finance company has a) heavily incentivised the borrower to keep paying (or their car won’t start) and b) made it much easier to recover the security for the finance.
The sum of which means that defaults and write offs are down, so the finance companies can be a lot more confident opening up to the illusive sub-prime credit market. Allowing more people to finance a car purchase than would previously have been able to.
All well and good? Well, certainly from the point of view of the finance companies (who book more loans and keep defaults to a profitable level) and the dealers (who get to sell more cars). But what about from the customer’s point of view?
At face value it looks to be good news for the customer, particularly those in the sub-prime space, as more customers are able to access a finance product for their car purchase. But, if the default rates are lower and repossessions are lower (and therefore write offs) – are the interest rates also lower?
A quick look at the top ranking sites on Google for ‘Car Finance’ found a Representative APR of 49.6 for applicants with bad credit – for a £5,000 loan over 4 years that’s a total interest of £5,236.
The interest rates charged cover the costs of providing the finance, including off-setting the loans that ‘go bad’ and are not repaid, and providing the lender with a return for its investment. The rate charged can be roughly translated into the risk represented by the borrower. The lenders have found technological solutions to reduce the risk of defaults and write-offs but still point to a borrower’s credit history to determine a level of risk – which justifies the high interest rates.
There is no regulation forcing a direct correlation of profit levels and interest charged but as we know, a highly profitable sector in financial services quickly attracts profiteering companies eyeing a quick (or large) buck. To keep this growing market buoyant but sustainable the lenders will need an element of self-regulation (and self-control), perhaps forgoing some of the bigger short term gains and passing on some of the profit to borrowers in the form of reduced rates.
(Source: Talk Loans)
