Thursday, September 16
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What Are The Different Types Of Loans Available? And More

The amount of money lent to individuals by government and private banking firms or companies, provided with interest, the amount obtained must be repaid within a specified period of time. The amount that these banking firms lend is known as a loan.

Although not everybody is qualified for a loan, you could utilize the loan eligibility checker to decide whether or not you are qualified for obtaining a loan.

Types Of Loans

There are several types of loans that an individual can obtain like payday loans, credit builder loans, and several more, but primarily there are two types of loans, secured loans, and unsecured loans.

Secured Loans

Secured loans are obtained when the borrower utilizes a tangible asset to secure his loan, the tangible asset can either be a house, vehicle, or anything else that meets the requirements set by the financial firms. The rate of interest set on the secured loan is based on the credit history of the borrower and the asset that the borrower uses to secure that particular loan. But generally, secured loans have a low rate of interest.

Unsecured Loans

Unsecured loans unlike secured loans do not require a tangible asset to be set against the loan the borrower obtains, these loans are solely based on the credit score of the individual in question.

This is good in a way, the borrower will not have to part with any of his assets in a situation where he is not able to pay back the loan within the specified period of time. But there is a downside to this as well, when the borrower fails to make payments on time, that will reflect in his credit history and bring down his credit score. This may make it difficult for that individual to borrow a loan in the future.

Payday Loans

These loans are a type of unsecured short term loans, but they come with a high rate of interest. Furthermore, the borrower is expected to pay back the borrowed sum when he/she is paid next.

Student Loans

Built especially for applicants (students) who want to pursue an education at universities. These loans are supervised and then approved by the government, after which they’ll be transferred to you and the college you are enrolled into. The tuition fees are always given directly to the university you get accepted into and the maintenance fee is handed over to the student to help them cover the living cost and other university expenses.

These loans can also be taken out by your parents. Those are called Parent plus loans and usually have a higher interest rate. The good thing is that you can refinance parent plus loans through refinancing companies.

Debt Consolidation Loans

Debt consolidation loans are a smart way through which you can combine all your existing loans and pay a relatively lesser rate of interest. This makes it easier for the borrower to manage his/her monthly loan payments and is a great way of managing debt, but there are chances that it may slightly affect your credit score.

Business Loans

Business loans are simple to understand, they are loans which are secured by organizations for business-related reasons. It may either be to start a business or to acquire assets to push the business forward.

Loan Eligibility

Although there are several types of loans that can be acquired but remember not everyone is qualified for a loan. There are certain criteria that needs to met if an individual wants to obtain a loan. People have the option of using a loan eligibility checker to determine if they’re eligible for a loan or not.

Here are some criteria that need to be met for acquiring a loan in the UK

  • The individual must be a resident of the UK
  • The individual must be over the age of eighteen
  • The individual must have a current account with the financial institution or the lender
  • The individual must also have a steady source of income

In order to check your eligibility for a loan, financial institutions run a credit check. This means the lender does a background check on the borrowers credit history to determine if the borrower can pay back the loan or not.

There are two types of credit checks that financial institutions conduct, a soft check and a hard check.

Soft Credit Check

A soft credit check is when the lender checks your credit history to determine the borrower’s ability to pay the loan back. The borrower can conduct a soft credit check by himself. Soft credits checks are more like a surface check, not an extensive one. The main advantage of having a soft credit check conducted is that it will not affect your credit score in any manner. Soft credit checks are extremely favored for this very reason, especially by individuals who have poor credit history and scores.

Hard Credit Check

Hard credit checks on the other hand are extensive checks that are conducted by financial firms to make sure that the individual in question can pay back the borrowed amount or not. However, hard credit checks when conducted leave a trace on the borrowers credit history and it tends to reduce the credit score of the individual. Although lenders do not need the borrowers consent to do this, solid reasoning is an absolute must.

Loan Eligibility Checker

A loan eligibility checker is a very innovative platform that can help an individual assess his eligibility to acquire a loan, all they have to do is fill in the required information and the type of loan he is looking for, once that is done, they eligibility checker will show them all the types of loans and lenders that may accept his request.

There are quite a few advantages of using a platform like this.

But there are some required criteria that needs to be met if the individual wants to use this platform, here are some

  • The individual needs to be a resident of the UK
  • Needs to be above 18
  • Is required to meet the monthly salary requirements

Overview

As you may have realized that obtaining a loan is no joking matter, as should not be treated as such.

One should always make sure they improve their credit scores, it will help them when they are in need of a loan for whatever reasons.

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