Loan agreements form an essential part of money borrowing. They protect both you, the borrower, and the lender. When applying for a loan, you must know the terms and conditions. Loan terms involve conditions set in place when you borrow money. This may include:
- Loan repayment period
- Interest rate
- Any other fee associated with the loan
- Possible penalty fees you might be charged
- Any other special conditions that may apply
It’s essential to review loan terms carefully. Doing this will help you understand your obligations once you take the loan. Anytime you apply for a loan, let’s say a personal loan, the lender should specify the loan terms before completing the borrowing agreement.
You must also review these terms carefully. This will help you identify hidden fees that could cost you a lot of money. Besides, it’s advisable to use an ROI calculator, which helps make such a decision as financement capital.
Let’s now look at the common loan types and terms you may need to know about.
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Small Business Loan
According to Small Business Trends, some of the small business loan requirements include:
- Good personal credit score
- Business license
- Bank statements
- Revenue or Balance Sheet
- Debt-to-Income Ratio or cash flow
- A functional business account
- Collateral or assets
Some of the concerns you may need to know about include:
- How to apply for a small business loan
- How to get a small business loan
- How to get a small business loan with bad credit
The beauty about reliable, on-demand Small business loans is that you get small business loan support. More so, there are often no hidden charges. With these loans, you can choose your repayment schedule. Thus, you can go with a repayment plan that won’t strain your business. This can range from daily, weekly or bi-weekly, to monthly payments.
Small business loans support can be possible in any of the following ways:
You Can Make Individual Draws Anytime You Need It
Once your application is complete, you’ll know the exact amount you can borrow. But, often, you already know the amount you need for your business at that time. Thus, you can make individual draws. And, you do this within your overall business loan limit. Each drawing has its fixed terms and fees. Again, all cost is upfront, with no hidden amount in small prints.
A pre-approved overall limit is set whenever you sign up for a small business loan. The limit is updated monthly based on your business performance. So, you can draw as much or as little as you need from this. Again, there are no hidden charges, and the interest rate is fixed.
Application is Simple with an Instant Pre-Approval
The current digital credit application process is fast and straightforward. In fact, it can take less than 10 minutes. As mentioned earlier, you only need some basic information concerning your business.
You may be asked to connect your online banking details safely. So, immediately you’re done, and you get to know what you can borrow. Also, this won’t harm your credit score. You need to have opened a bank account online in such a case.
The best thing is that you understand your business needs better than anyone else. So, you might wish to invest in either business growth or seize a new opportunity. And, in any of these, you are not restricted on how to use your business loan.
Personal Loans
Personal loans are money you borrow for almost any purpose. There are many reasons for taking a personal loan. Some may include:
- Debt consolidation
- Unexpected medical bills
- Vacation
- Home remodeling
- New appliances
Once approved for a personal loan, you will receive the funds into your bank account. The transfer may take as low as 24 hours or several weeks in some cases. It all depends on the lender. So, you’ll start making monthly payments around a few weeks after the loan is disbursed.
Most personal loans contain fixed interest rates. This means that your monthly payments will remain constant. In most cases, personal loans are unsecured, meaning that you don’t need to offer collateral.
If you don’t meet the standards for an unsecured personal loan, you may use collateral in the form of:
- A certificate of deposit
- Savings account
A friend or a family member can co-sign on your loan in some instances. This will facilitate your loan approval.
Besides, the current technological innovations enable online loans. In this case, you can apply for online personal loans. These are installment loans that you can apply for online. You don’t have to visit the local branch to avail such loans. Like the other personal loans, you can use your online personal loans for almost any purpose.
Understanding Different Loan Terms
Some of the essential loan terms to be aware of include:
Loan Repayment Period
The loan repayment period is the time frame in which you will pay off the borrowed money. Basically, this will involve:
- The payment amount that goes to the principal
- The amount of each payment that goes to the interest
- The total interest amount paid overtime
- How your principal balance reduces over time
Interest Rate
The interest rate is the amount a lender will charge the borrower. It’s a percentage of the amount loaned (principal). Usually, the interest starts to add up once the loan is already disbursed or when the credit is issued.
Often, a borrower termed low risk by the lender is likely to have a lower interest rate. But, a borrowed loan considered as high risk tends to incur a higher interest rate.
Fees
These are the extra charges applied for you to get the loan. They add to the loan’s total amount. In most cases, the loan fees are subtracted directly from your total loan amount before the disbursement.
Some essential fee aspects to look out for in your loan terms and conditions include:
- Annual fees
- Origination fees
- Late payment penalties
- Prepayment penalties
- Application fees
Often, it’s upon the lenders to decide the amount of the fees to charge. They also choose when to apply the fee. For instance, some lenders may charge an origination fee, which they use to cover the cost of loan processing. However, others may not charge this particular fee but will apply different charges.
Key Takeaways
The terms of your loan will often depend on several factors. These may include your creditworthiness and your reasons for the loan. It will also depend on your loan repayment period.
Note that a more extended loan repayment period leads to lower monthly payments. But, a longer loan repayment period may also imply more interest to pay over the entire loan life.
Thus, it can be wise first to use an investment calculator. This will help you determine whether a shorter-term or a longer-term loan works best for your financial situation.
