Tips for Online Loans

When you need money, scheduling an appointment with your local banker is not always a convenient option. Online loans provide convenience brick and mortar banks lack, but come with a new set of concerns. The anonymity of the internet coupled with the sheer volume of online lenders makes cyberspace a breeding ground for financial scams.

Finding an Online Lender

Locating a credible company to process your loan is the first order of business. The kind of loan you desire may focus your search for online loans into a particular area. If not, you can follow a few basic strategies to find a lender and verify their credibility.

• Visit popular banking sites. Most of the national banks and credit unions have online lending departments ready to meet your needs. Look for a link to the company’s online loan application on the site. Major banks may not offer rates as low as smaller competitor sites, but you gain the peace of mind in knowing this company’s reputation and financial stability.
• Search for a physical address. Although they do business online, there must be a physical office where underwriters and loan processors work. Even if you’re working with a broker that outsources most of the operation, he has to physically be somewhere. If you cannot locate an address for a company, move to another lender.
• Check for complaints. This does not have to be a drawn out process. A quick search of the Better Business Bureau or your state’s Attorney General will reveal if the company uses questionable lending practices. If nothing else, enter the company’s name into your favorite search engine to see if disgruntled posts appear.

Working with Online Lenders

With in-person loans, getting information to your lender is a straightforward process because you can drop off anything she requests. With online loans, you must rely upon technology.

• Fax machines. If your lender requires paystubs or tax returns, ask about the safety of the fax machine. Is it in a secure location or unattended in the middle of a large office? Although the majority of company employees wouldn’t do anything with your personal information, only send to fax machines where you know your lender will immediately get your documentation.
• Email documentation. When you have access to a scanner to upload your signed documents to your computer for emailing, always use this option. It’s easier to confirm receipt and there is less risk of interception.
• Mailing documents. Putting your loan documents into the mail is the worst option of the three, but some lenders will insist upon receiving original signed loan documents. Never send your documents through regular mail. Instead, use certified mail or a courier company so you can track delivery.

As long as you take the time to verify the legitimacy of your lender, online loans are a fast and convenient way to get the money you need.

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Small Loans for Debt Consolidation

If your credit card balances reach astounding heights, wanting a single payment at a lower overall interest rate is a natural desire. Although your bank may not be willing to offer you enough to pay off everything, consider how you can best leverage the small loans you can get. It’s a slower process, but paying off cards snowballs as you knock out your balances, making a bigger dent in the total number.

For example, if your total credit card debt is $25,000 with an average interest rate of 18 percent, taking a bank loan at 10 percent will almost cut your interest payments in half. In this situation, the lender offers a loan of $5,000, well under the amount you need. You have the option of turning this down; however, consider what you can accomplish with this relatively small loan.

You have three main options for the money.

Highest Interest Rate Approach

When your average interest rate is 18 percent, this means you pay rates much higher than that. List out your credit card interest rates and order them from highest to lowest. Starting at the top of the list, pay off as many cards as you can with the $5,000 loan. Yes, you’ll still owe $20,000 in credit card debt in addition to the $5,000 bank loan, but your average interest rate for the money should drop from 18 percent as a result. This means you’re paying more each month towards your principle balances than you were before you started using small loans. Paying less interest is a good thing.

Smallest Balance Approach

Depending on your financial situation, you may find that your $25,000 debt is scattered among 10 credit cards, making unreasonable demands on your monthly bill paying time. List your credit card balances from smallest to largest and see how many cards you pay in full before the $5,000 runs out. You may not save on interest as a result of this method and your overall credit payment amount may not go down, but you will save time by no longer writing as many checks or making as many online payments each month.

Largest Payment Approach

If cutting your monthly payments is your goal, using small loans can help. Determine which credit card has the highest monthly payment and apply the $5,000 loan to it. It doesn’t matter what the interest rate is or if you can pay off the full amount. Just pay it. As long as the payments fluctuate with your balance, the monthly payment will feature a decrease at your next statement.

Before using small loans for debt consolidation, perform your own calculations to make sure you’re using the consolidation approach that works best for you. If a consolidation loan won’t help your financial situation with the lower loan amount, pass.

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Signs of Bad Personal Loans

For the most part, lending companies are honest business ventures seeking to make a profit from providing loans to customers in need of the product. Although some lenders charge higher fees than you wish to pay, they are still legitimate entities. Unfortunately, not every lender behaves in an ethical manner and borrowers may not recognize the signs of bad personal loans until after they close the deal.

Spam Marketing Techniques

Unless you have an amazing spam filter on your email accounts, you’ll receive credit offers in your inbox at some point. When you’re in need of extra money and you find a guaranteed approval offer when you log in, it seems almost meant to be. That’s what the lender wants you to think. Out of the thousands of people they sent that message to, they hope a decent percentage will accept their terms.

Some of these spammers are out for your personal information so they can steal your identity. Other spammers want you to apply for their loan that charges loan shark rates. Either way, it’s smart to avoid working with companies who are too eager to seek you out. Quality lenders gain business through proven marketing efforts; bad personal loans use shady methods.

Pushy Sales Approach

Lenders like to impart a sense of urgency on their potential customers to make the sale. If they let you walk out of the office, they risk you finding a different lender and losing the loan sale. When your lender presses you to submit the application right then, it’s not a warning sign of bad personal loans; it’s a standard technique to make the sale.

On the other hand, you know the difference between someone trying to make a sale and someone trying to intimidate you to get what they want, in this case, the loan application. No matter how rough your credit history may be, your lender should never talk down to you because of it. Making threats about how you won’t get a loan anywhere if you don’t accept this one is also unacceptable behavior. If you’re in this situation, walk away. Using these tactics to win your business can only mean things will quickly deteriorate after you close the loan.

Avoiding Bad Personal Loans

While there is no magic formula to avoid bad personal loans, you can contact the Better Business Bureau to find out if other customers report shady behavior from a lender. Doing a bit of simple research on the lender’s website is also a good idea. If you can’t find an address and phone number for online lenders, but you do find a site riddled with typos, broken links and missing web pages, continue your search for a reputable lender.

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Secured Personal Loan Considerations

Among the most common types of loans is the secured personal loan. This loan can range from the simple to understand auto deal to a complicated borrowing arrangement with your life insurance company. Although every loan and lender works a little different from the rest, there are basic elements and considerations among secured loans.

Collateral Considerations

What sets a secured personal loan apart from unsecured lending options is the collateral requirement. Collateral is merely something you offer to the lender in exchange for the loan, providing an extra level of assurance that you intend to repay your full loan amount as specified in the lending agreement. This is an attractive option to borrowers who need more money than they could otherwise qualify for without collateral.

Using something as collateral is not a decision you should reach without careful thought. In the case of a car you own free and clear, offering it as collateral can drastically change your insurance expense. Once a lender accepts a vehicle as loan security, you often must maintain full coverage insurance on it for the life of the loan. Unless you already use this coverage option instead of carrying liability insurance, you could see additional premiums of hundreds of dollars a year as a result.

When you use stock certificates as collateral, you lose the freedom to trade your investment as freely as you once could. When the market dips, you may even receive a call that a portion of your loan is now immediately due because of the collateral’s decreased value.

Special Factors

Secured personal loan lenders are selective about the kinds of collateral they accept. This adds protection to the lender that they will not end up with a worthless item in the event you default on your loan payments. This also means you must do more research when shopping rates if your collateral is unusual or rare.

For instance, even though high-end sports cars typically hold their value well if you keep up with scheduled maintenance, not every lender will provide a loan using this vehicle as collateral. Those that do may charge higher interest rates because this is a special luxury item. The same holds true for a secured personal loan using rare coins, valuable artwork or jewelry as collateral.

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Secured Loans

In the realm of lending, there are two primary types of loans: unsecured loans and secured loans. As the names imply, either you sign and take the money or you provide the lender more than your personal guarantee to repay. Before you decide which way to go, know that there is more involved than simply making the lender feel safe in their lending decision.

Basics of secured loans

Banks like making secured loans because there is less risk to them. The item you use to guarantee the loan is called collateral. As a rule, lenders expect the collateral’s value to exceed the amount of the loan for the term of the loan. This is why auto secured loans require you carry full coverage insurance on the vehicle for the life of your note. They want to ensure they receive their money even if something happens to the car.

While it is not always the case, secured loan rates are typically lower than unsecured loan rates. Again, this is a function of the decreased risk to the lender being passed along to you in the form of savings.

Kinds of secured loans

Mortgages and auto loans are the two most common kinds of secured loans, but any loan offering collateral in exchange for the funds is a secured loan. Some lenders accept stock certificates, retirement accounts and even insurance policies as collateral as long as your plan or policy does not specifically prohibit it. You can also secure a personal loan for business purposes with business equipment because it has a tangible value attached to it.

Jewelry, artwork and rare coins are less common collateral options, but options nonetheless.

What happens in default

As with any lending obligation, there are consequences for failure to repay secured loans. In addition to the default showing up on your credit report and adversely affecting your credit score, foreclosure or repossession can occur. If, for example, you used your truck to secure your loan and stop making payments, the truck is legally property of the lender. You receive notice to surrender the vehicle, but if you don’t comply within a specified amount of time, someone will come to take the vehicle from you. In the case of home foreclosure, you must vacate the premises within a certain period of time or your things are placed on the lawn and locks are changed.

Only you can determine if secured loans are the best option for your financial needs when choice exists. So long as you understand the rules going in and make your payments on time, using collateral to secure your loan can save you hundreds or thousands of dollars over the life of the loan compared to using unsecured loans.

Source: http://www.superpages.com/supertips/secured-loans.html

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