Monthly Archives: January 2018

Different Types of Loans for Financial Hardship

It is never desirable to be in a situation where you have to get a loan. However, sometimes it ends up happening. Unless you make a huge salary and live in a very modest manner, it is always a definite possibility that you will end up in over your head financially. For these situations, it is good to be as prepared as possible. One thing that you can attempt to do is keep emergency funds stashed away. However, if this is not a possibility, it would do you some good to learn about the types of loans available through Learning about loans can be a valuable exercise, as this knowledge can end up helping you when you end up in the situation where you may need one.

Many people know about the payday loan, where a lender will allow you to borrow a small amount of money that needs to be paid back with interest on your next payday. However, there are limits to the utility of this type of loan, as it comes with high-interest rates and has relatively low upper limits as far as what the lender is usually willing to let you borrow. The main alternative to a payday loan is a personal loan, where the lender will usually give you much more time to repay the money. Typically, they will allow you to pay it back in installments over a period of two to five years. In addition, the interest rates for these types of loans are typically significantly lower than the interest rates for payday loans. However, these loans are not necessarily an option for everyone, as they will check your credit score before approving you. As such, if you have a poor credit score, it could be very difficult for you to get one of these loans; it is likely that even if you are approved for a personal loan, you will have a very high-interest rate that comes with it.

There are other payday loan alternatives as well. You can look into peer-to-peer lending, though you should keep in mind that here as well, people with lower credit scores are going to have to deal with higher interest rates. You could also consider borrowing money from your retirement account if you have one, although you would need to pay the money back on the terms specified if you do not want to lose a chunk of your retirement funds. If it is an option, you could consider refinancing your home or another asset as well, although you would need to keep in mind that you would be using a major asset as collateral here and would be at risk of losing it if you did not repay the loan on the agreed terms.

Financial education can be very useful for anyone, even if they are not currently facing financial hardship. It is impossible to predict this sort of thing happening; you could have a job that pays six figures and ends up losing it with no notice, leaving you in the lurch financially. As such, it is important to know what your options will be if you end up with no money to pay for basic expenses, no matter how unlikely you think this scenario might be. If you are interested in learning more about loan options for cases of financial hardship, it would be very wise to do research on the options that would work for your situation.