Life can be full of surprises with emergencies springing up at any time. Without having the funds to take care of these emergency expenses when they arise, you may find yourself falling into despair. To help with situations such as these, you can apply for a consumer loan from any reputable lender.
A consumer loan is a credit facility given to a consumer for financial assistance. This credit facility comes in two forms. One is the secured type, which requires you to provide an asset of value before your application is approved, while the other is the unsecured type, which does not require you to pledge an asset of value.
You can go for any of these two distinct types depending on your situation and/or preferences. This article will provide a guide that will help you understand the two types of consumer loans available and how you can get them on time. Let us begin!
Types of Consumer Loan
There are several types of credit facilities grouped under this category. They include the following:
House Loan
This is a secured consumer loan more commonly known as a Mortgage. This is a type of credit facility offered to help you with the purchase of a new home. The lender will provide the required funds based on your creditworthiness and ability to make a down payment. The house to be purchased is also used as security to guarantee that repayment will be made as at when due. If you would like to know more about how mortgage works, read this article.
Credit Cards
This is an extremely popular and widely used type of consumer credit facility. This card helps you to make purchases of all kinds, from groceries, apparel to electronics and more, through the line of credit given by the lending institution. The interest paid on credit cards can be quite high. Also, if you fail to repay your balance on time, you will be faced with an expensive penalty.
Car Loans
This is a secured consumer loan that funds the purchase of vehicles. You can get it from many lenders and auto dealerships.
Student Loans
These are also known as Education loans and are offered to students to fulfill their education dreams by paying for their tuition or college fees. These funds help students pursue their education without distractions so they can then begin to repay the debt after they have graduated from school.
Home Equity Loan
This credit facility allows you to utilize the equity value of your home as collateral to borrow funds. This value is the difference between the real value of the home and the current mortgage payment remaining on the property. The money you borrow can be used for home remodeling or renovation projects.
Refinance Loan
As its name implies, it is given for the purpose of refinancing existing debts. For instance, you can use this facility to refinance your expensive student, auto, and credit card loans. Because this loan comes with low interest, you end up with lower repayments after paying off the expensive debts. This helps you to repay the existing debt on time, ensuring your credit score is not negatively impacted.
Personal Loan
This is one of the most popular consumer loans that many lenders offer today. It refers to money you borrow for different personal purposes. You can use it to make purchases, projects, or cover emergency expenses. It comes in both secured and unsecured forms.
How to Get an Affordable Consumer Loan on Time
There are several things that can help you get this loan on time. We will now discuss some of these below.
Understand Your Financial Capabilities
Are you financially capable of repaying the debt? Most lenders will try to ensure that you are financially able to repay the debt before offering it to you. For example, if you work in a respected organization, it would not be hard for you to get a loan. It is quite easy to borrow money and receive the funds on time if you can show financial capability.
Knowing How Much is Necessary
Another thing that can help you get approved on time is knowing how much you need to borrow. You would not want to borrow an amount that you cannot pay back on time. To avoid this situation, ensure that you know how much to borrow.
Apply for a Low Amount
Many lenders do not have extremely strict requirements for low amounts like they would for larger amounts. If you wish to get the borrowed funds on time, you can apply for a lower amount. This lowers the risk of your application being rejected while also hastening the approval time.
Check Your Credit Report
This report can greatly affect the chances of your loan application being approved. Most lenders will conduct a credit check to determine your creditworthiness before lending money to you. If you have a poor score, you are not likely to have your application approved. Even if you do, you might be given a loan at a high rate of interest.
To avoid this, it is wise to check your credit report and take steps to improve the score before applying for a loan. You can then be sure of getting the best deals available.
Look out for Errors in Your Credit Report
In rare cases, a poor score in your report can be caused by certain errors. These include missing or late entries, incorrect financial transaction information, and wrong names. You need to ensure that you check to see if there is any error in your report. Do this regularly and update it on time. This way, the lender you go for will not have any issues in determining your creditworthiness.
Debt-to-Income Ratio
If you want a lender to hasten your application process and grant you a loan on time, you need to make sure that you have a low debt-to-income ratio. This ratio shows how low your debts are when compared to your financial situation. You need to make sure that the ratio is lower than 30% before applying for consumer credit.
Go for a Collateral Based Consumer Loan
Collateral serves as a guarantee that you will repay your debt on time. Should you default, the lender will repossess your assets. For this reason, most secured loan application processes are faster than unsecured ones. It doesn’t involve checking your credit score so you can be sure that you will be given the money on time.
Choose a Cosigner
If you have a poor credit score, it will slow down your application process. To hasten things, it is wise to go for a co-signer. A cosigner is someone who has a better score than you and will assist you with borrowing money from the lender. The co-signer will also assist in repaying your debt if you fail to repay on time.
Include Yourself on Someone’s Credit Card
Another way to get a consumer loan on time is to add yourself to someone’s card. This is a very easy way to get funds on time. Ask your trusted friends or close companion if they can assist you with this.
Have Important Documents Handy
Another thing that can help to hasten your loan application is to have all your important documents handy. Some of these documents include:
- Proof of address: Rent agreement, mortgage documents, and any documents with your address.
- Proof of identification: Passport, Birth certificate, driving license, citizenship certificate, utility bills, state ID, etc.
- Proof of income: Payment slips, bank statements, and tax returns.
Make sure that you have all the documents handy so that the loan process can be hastened and you can receive the borrowed funds on time. For other ways to hasten a loan application, click here: forbrukslånet.com/ for help. Remember that speed of approval should not be the only consideration. It should also be affordable.
Conclusion
This article has discussed the several types of consumer loans available. It has also helped in explaining the different things to keep in mind if you want to get the loan approved on time. Keep all this in mind as you take this financial decision.
