Plan as you may there comes a point in your life when you might need a bit of help financially. Whether you want to purchase a large ticket item that you can’t afford on your own, find yourself in a heaping pile of debt you need to get out of, or need to cover an unexpected expense such as a car repair, there are options available for you. Obtaining a loan from a lending service provider can be the simplest way to get the financial assistance you need to get back on track.
Whether you opt to go to a local bank, or work with an online lender, knowing which loan to choose and how to be a responsible borrower is key to staying out of further debt.
Types of Loans
There are several loan types that one can consider when looking for financial assistance. The type of loan you choose will depend on varying factors including the purpose of the loan, your current financial and credit history status, and personal preference. Below is a rundown on the main loans offered and what they can be used for:
- Personal Loan – the most generic form of loan is a personal loan. This loan can be used for just about anything “personal” you might have going on. Whether you want to take a vacation or go on a shopping spree, personal loans would be ideal.
- Car Loan – as the name implies a car or auto loan is obtained when you don’t have all the necessary funds to purchase a new or used car on your own.
- Home Loan – again, the name is self explanatory, a home loan or mortgage is obtained in order to purchase the cost of a residence you intend to own.
- Student loan – if you’re having difficulties affording your college education or other educational expenses, a student loan would be the option best suited for you.
- Bad Credit Loan (Payday Loan) – For those unexpected emergencies that happen to come up (i.e. car repair, housing repair, unexpected bill, etc.) a bad credit or payday loan might be the best option. This is also ideal for individuals who cannot obtain a personal loan due to poor credit history.
Each loan described above will have its own set of guidelines depending on the service provider you choose to borrow from. Again, determining which loan is best for you will really depend upon your credit history, financial need, and ability to repay according to predetermined guidelines set up by the lender. It is imperative to make an informed decision when taking out a loan of any type, as failing to pay it back in a timely fashion could result in negative credit ratings and increased debt.
Reasons Consumers End Up Further in Debt
Loans are very useful to those who are really in need. However, when you fail to meet your obligations as the borrower, it can cause a downhill affect on their credit, increase their debt, and minimize their potential to borrow in the future. Below are some of the most common reasons consumers end up having a negative experience with lending institutions:
- They borrow more than they can afford to repay – one of the first issues when consumers borrow funds is that they borrow more money than they can afford to repay. Many have an, “I’ll deal with it later”, attitude, however, they don’t think it all the way through.
- They borrow without fully understanding the agreement – When you’re in a jam and need money fast, you simply bypass all the logistics and sign on the dotted line. Later on they find out what they’re obligations are but cannot actually stick to them.
- They don’t communicate when something comes up – there’s no denying that life happens when you least expect it. The loss of a job or even another unexpected bill coming up can really throw you off budget. However, when consumers cannot commit to an obligation, they go into hiding instead of communicating the matter with their lender.
How You Can Be a Responsible Borrower
Borrowing responsibly is the only way to deal with loans of any type. When you do so, you get to see the true benefits of having a loan and also improve your chances of being approved in the future should you need it. Here are some tips to stay out of debt and be a responsible borrower:
- Do your homework – You should never borrow from a service provider without first having done a bit of research on them. Not only should you check the company website and consumer reviews, but also social media. Companies such as MaxLend Loans have social media accounts that allow consumers to get a first hand update on services offered. You only want to borrow from a legitimate company to avoid scams.
- Borrow only what you can afford – If you were to look for a loan from a lender such as MaxLend, you’d see that they offer up to $1,250. However, if you don’t need this much money, borrowing that much could put you further into debt. Therefore, only borrow the amount you can comfortably afford to repay in a short time frame.
- Review the contract – No matter what the financial emergency might be take the time to review the contract and understand your responsibilities before signing on the dotted line.
- Communicate effectively – should something come up that prevents you from paying as you’ve agreed, pick up the phone and reach out to the lender to let them know. Dodging them creates the assumption that you’re not willing to repay which could result in higher fees and collection charges.
Even the financially sound need a little assistance from time to time. Taking out a loan can be a great way to afford things that you need (or want). However, if you’re going to maintain a good credit history and relationship with your lender it is important that you aovid common pitfalls and be a responsible borrower. This will then give you the opportunity to borrow again and may also improve your credit score in the long run.