Different Options for Borrowers Who Are Looking for Low Rate Personal Loans

by John Stevenson on January 25, 2014

Banks and finance companies offer secured and unsecured loans to new and regular customers. The fees, penalties, closing costs, and interest rate are important factors. You will not qualify for the best low rate loans if your record shows a history of missed payments, delinquencies, or bankruptcy.

Types of Financing

Borrowers can choose from different options, including second home, vehicle, and other loans. If you are a recent graduate and plan to finance the purchase of a vehicle, you can apply for a loan with no prepayment penalties, flexible repayment terms and schedule, and deferred payment. Some of these loans are unsecured while others require collateral in the form of a valuable asset such as land, real estate, vehicle, or anything else of value. Customers are also offered mortgages, which are a type of secured loan, are offered by different financial establishments. Borrowers can choose from different types of financing, including adjustable rate, fixed term, and conventional mortgages. Borrowers can choose from high ratio and conventional mortgages and bridge financing. When choosing a secured loan, it is important to consider factors such as acceptable types of collateral, the down payment, variable vs. fixed interest rate, and others. Closing costs such as inspection and appraisal fees and points add to the cost of borrowing, and it is best to put at least 20 percent down. Conventional mortgages require a down payment of 20 percent.

In addition to these types, there are reverse, interest only, and balloon mortgages. Subprime mortgages are offered to borrowers with a less-than-perfect credit score. Borrowers have plenty of choice, including loans and revolving credit.

High Interest Rate Loans and Alternatives

Debt-ridden borrowers often apply for payday loans. While borrowers with bad credit qualify, payday lenders are known for their aggressive collection and advertising practices. Borrowers who are salaried employees usually qualify. Borrowers who default face consequences such as collection activities and financial implications. These are short-term unsecured loans with a term that usually varies from 2 weeks to 1 month. The default rate is between 10 and 20 percent, which means that lenders take more risk compared to banks and credit unions. Payday loans are a last resort because of the high interest rate. There are alternatives to payday lenders, including auto pawn loans, pawnbrokers, and credit card cash advances. Private lenders, for example, offer loans to business and individual borrowers. This is one alternative to banks and credit unions whereby online platforms serve as an intermediary between borrowers and lenders. There are other options for borrowers, including installment loans and credit payment plans. You may also ask your family for a small loan.

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