Securing financing can be one of the most stressful and nerve-racking adventures. We can help you gather the financial documents, educate you about loan terms and coach you on the best type of financing for your needs.
There are two types of personal bank loans: unsecured and secured. Secured bank loans use collateral in order to help you receive lower fees, better repayment terms and a more beneficial interest rate. An unsecured loan is issued is without collateral and usually carries a much higher interest rate. The caliber of your financial situation and what you are using the financing for will most likely determine which type of loan you will receive at what interest rate.
Another important type of loan to understand is a SBA (Small Business Administrations) loan. This loan is from a government funded administration that helps small business owners obtain loans when a regular secured loan might be impossible. In simple terms the government acts as a “co-signer” and if the business defaults on the loan then the government will cover the balance. This makes bank lenders more likely to take on the loan because they have less risk. The SBA sets the guidelines for loans and the lender must follow them. This type of loan takes longer, has more restrictions and has higher fees than a conventional loan. Historically, the government provides this because they know that entrepreneurs drive the U.S. economy by providing jobs for over half of the nation’s private workforce.
When obtaining a loan of any kind, it is important to:
Know your credit score. You can get a free copy of your credit report at www.annualcreditreport.com. If you see any discrepancies on your report, it is best to dispute them before applying for any type of bank loans.
Shop around. It may seem like common sense, but you’d be surprised how many people settle for the first bank loan offered. Before you apply, check other institutions for the best possible interest rate and make sure you’re getting the best deal for your individual needs.
Know your repayment terms. Before accepting a bank loan, know if your monthly payment is fixed or variable – most of the time it is more advantageous to have a fixed payment loan. Make sure you ask about upfront fees and whether the loan is disbursed all at once or in installments.
If it is a personal loan you are applying for – offer collateral. No one likes high interest rates. Offering collateral could help you get a lower interest rate on your personal bank loan and in turn save you a great deal of money.
Repay your loan according to the terms of the agreement. If you don’t pay back your loan as outlined in your agreement with the bank, you could risk losing your good credit standing or the collateral you offered to get a secured bank loan.
Bottom line, when applying for personal bank loans, do your research, know your options and take the time to go through all the terms and conditions you and your lender have discussed before signing any official documents. As your Michigan CPA, accountant and financial consultant we are happy to go over any of your needs with you and offer you advice and information about the types of loans you are looking into, as well as how they will affect your financial picture overall.
