If you are looking for a short-term loan, then you may wonder which option to take. You may not really know much about the different types of loans that are available and you might wonder which will be most suitable for you. It is a good idea to understand what the similarities and differences are […]
If you are looking for a short-term loan, then you may wonder which option to take. You may not really know much about the different types of loans that are available and you might wonder which will be most suitable for you. It is a good idea to understand what the similarities and differences are so that you can choose between the loans and find the one that will be the best for you.
Similarities Between the Loans
Both of these loan types require no credit check. This means that if you have a poor credit record then you will be able to use them. Most lenders will do a through credit check and will only lend to those that seem worthy of a loan. They will be looking for different things but they will want to be sure that you will be able to repay the loan. They will look for evidence that you have repaid loans previously or have been able to keep up with regular repayments on bills or contracts. If you cannot provide the evidence that they want then you will not be able to get a loan like this. However, short-term loans will be available to you still as they are not so concerned with whether you have got a good credit history or not.
They are also both quick to arrange. The lenders realise that this sort of loan could be used in emergency situations and therefore will need to be arranged quickly. It is possible to get some loans organised within a few hours, but this will depend on the lender. If you do need the money really quickly, then it is wise to check with the lenders to see how long they are expected to take and this will help you to make sure that you get the money for when you need it.
Differences Between the Loans
The loans do have differences as well and the lenders will have various differences between them. However, the main difference is with regards to repaying the loan. The payday loan will need to be repaid in full very quickly. The idea is that you borrow money to keep you going until you next get paid. Then you will repay all of the money that you borrowed and the interest all in one go. This means that you will be able to clear the loan really quickly.
With an instalment loan you will pay it back over a longer time. You will not be expected to pay it all in one go but you will pay it over a series of months. Although this will mean that the repayments will be smaller and the loan should be easier to manage, it will mean that it will last longer.
Deciding Which is Best
You will need to make sure which option will be the best for you. You might like the idea of being able to clear a loan quickly and get it paid off. However, you will need to carefully calculate whether this will be something that you can afford. You need to find out exactly how much you will need to repay and when it is due to be repaid in order to do this. You can then work out how much money you will have at that time and whether, once you have paid, whether you will then be able to afford to pay for everything else that you need.
The instalment loan can make things easier. You will be able to repay smaller amounts each month. This can make it more affordable and reduce the risk of you missing the repayment. If you fail to repay, you will get extra charges which will make the loan more expensive. By spreading the payments and making them smaller, the chances are that you will be more likely to be able to afford them and this could mean that you will be more likely to avoid these extra charges. It does make the loan more expensive because you are borrowing the money for longer. However, if you find it easier to make the repayments then it can be worth paying the extra. It could also make it easier for you to manage your other expenses during the course of the loan.
The decision will very much depend on your personal circumstances. However, if you think that you will find it easier to manage with instalments then it is likely that will be the best choice for you. However, whether one loan is better than the other is a very personal decision and you will find that some people prefer one type and others refer the other type. There will also be differences between the specific lenders making some better than others. Therefore, you will need to do some research to find out for yourself which will be best for you.
If you want to buy a home then you will need to find a mortgage in order to pay for it in most cases. Very few people are able to afford to buy a house outright without having to borrow money. A mortgage can be a great help as you will get a majority of the money that you need. However, you will also find that with most mortgages you will need to pay a deposit so that you can get the money that you want.
Why pay a deposit?
It can be hard to understand why the lender might want a deposit. However, there are a few reasons that they want one. Firstly, it will show that you are responsible with money and can save up the money required. But the mortgage company also wants to protect themselves against the home falling in value. This is because when you first buy a home, you will not have repaid very much of the money you borrowed. If you cannot make repayments, they will repossess the house and sell it to make back the money that you owe. If the house goes down in value or even if it stays the same, they may not be able to get back all the money they are owed, once they have taken out their costs and the costs of selling. This means that they would rather not lend you the full value of the house.
It can also be better for you as a mortgage payer to borrow less money. If you can save some up first, then you will borrow less and your repayments will be lower. You might be able to repay over less years or just repay less each month. You may even be able to make overpayments and be able to repay the mortgage more quickly. Do there are advantages to you as well if you have a smaller mortgage.
How to raise the deposit money?
Raising the amount needed for a deposit can seem very daunting. This is why some parents set up trust funds for their children when they are born and put money into them regularly so they can use that money when they need it. However, not everyone gets help like this and so they will have to figure out how to do it themselves. Most people will save up money each month until they have enough. They will reduce their spending and increase what they earn so that they have spare money available to save each month. By setting up a direct debit to transfer savings into an account when they get paid, they will not be tempted to spend the money on other things. Some people use a Help to Buy ISA which is a government incentive to help people to save for a house deposit.
However, what do you do if you find a property that you really like and you do not have a deposit or maybe not enough deposit to pay for it? You might decide that borrowing the money could be the best idea. However, you may wonder what type of loan to get for this. It might not be a good idea as your mortgage lender will look at the loans you have and may decide that you cannot borrow for them as you already have a loan. However, if you wait to get the loan until the mortgage is secured then you might be able to get away with it. A guarantor loan could be a good option for this as you can borrow a large sum of money and very quickly.
Is a guarantor loan a good solution?
With regards to the speed that it takes to arrange the loan via someone like HappyPenguin in the UK, then a guarantor loan could seem like a good idea. It may work well for some people, but you will need to think about whether it will work for you. Firstly, you will need to work out how much it will cost you to repay as you will need to find the money to repay this, make your mortgage repayments and cover all of your other bills as well. It is wise to calculate how much you will need so that you can work out whether this will be something that you can afford.
To get a guarantor loan you will also need to find a guarantor. They will need to be a person with a good credit record who is willing to help you out and pay any repayments that you miss. Some people will immediately be able to think of someone that will be able to help them with this but for others it could be more difficult. It will depend on what the people you know are like, what their credit status is like and whether they are likely to help out.