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Monthly Archives: February 2017

Home Loan Qualification Factors

1) Credit history – One of the first steps in approving a loan is pulling the potential borrower’s credit record. This history shows not only the bad things (such as foreclosures or bankruptcies), but also the good (such as attempts of repaying debt). Using this record, loan processors try to determine how reliable you’ll be for paying back the loan that you’re asking for.

2) Liquid assets – Loan processors also want to see how much money you have sitting in checking and savings accounts. They’re not looking specifically for large sums, but rather they want to see that you generally keep enough money in your account to cover unexpected emergencies. If you’re literally living off what you make each month, lenders may assume that it’s only a matter of time before you miss a payment due to inadequate funds.

3) Debt to income – Lenders look at the ratio of money you owe to the money that you make. They generally calculate in the costs you’ll incur from the current loan that you’re requesting. So, putting in this requested home loan with previous loans (from credit cards, school, car, etc.), they’ll establish a debt to income ratio. The lower this ratio, the better.

4) Income – In order to establish this debt to income ratio, the lender will need to consider your current monthly income. The lender will ask for previous pay stubs and income tax forms in order to see that you have a stable job with stable income.

5) Loan to value – This ratio is also called LTV. Lenders calculate this number by taking the loan amount you’re asking for and dividing that number by the home’s appraisal’s value. The more money that you’ll put in the down payment, the lower this loan to value ratio is (and the better off you’ll be in the loan approval process). Lenders specifically look at this ratio because statistics show that the more money you have invested in a property, the less likely you’ll default on the loan.

6) Appraisal – Your lender will require that the home is appraised before they sign a loan over to you. This step is to ensure that the home is actually worth what you’re lending to pay for it.

 

About Peer to Peer Leading

It definition is implicit in the name peer to peer lending and it is the process of individuals lending money to each other. It is rooted with the idea that a bank should not play a large role and reap the majority of returns. In the model of social lending, the bank or financial institution facilitates the loans and get a small rate of return for doing so. In essence it is cutting down the middle man. To get the true underlying rationale, we need to examine the basic model of receiving a loan from a bank.

It begins with individuals using banks as a method of saving their money. The banks pay a low rate of return for the deposits as for the banks right to use the money for lending. On other side are individuals applying for a loan or mortgage. The bank takes the deposits it has and lends to the borrower at a much higher rate of interest. The difference in interest paid and interest earned is the bank’s revenue. In this model all of the risk is assumed by the bank. Meaning, the obligation of paying interest to the saver and preventing default of lent money is the risk.

With peer to peer lending the model is shifted. The bank or institution pays a much smaller role. An individual lender can choose what to lend and who to lend too and therefore majority of the profit from the loan is transfer directly to the lender. With this trade off of less bank involvement there is an increase in risk to the individual lender in the form of default. For the borrower, the benefit is more often than not a lower cost of transaction translating itself into a lower rate of interest on the loan.

How peer to peer lending is actually facilitated is an auction process with a basic market place provided by the lending institution. Which means the institution that processes the loans between individuals is the one that provides the method for individuals to find each other. Then the borrowers and lenders are able to select each other. Now, the lending to a person you have never met before does has its risk, but the presence and responsibility of the financial intermediary is to ensure individuals are accurately represented.

This is a concept would have never been considered until a few years ago. The internet actually is the stage that allows this to happen. The increase sociability of individuals caused by use of the internet provides this unique way to invest and borrow money never before possible.

 

The Loan Types Available to You

Personal Loan vs Credit Card

A personal loan offers lower interest rates and is usually a far better option than using a credit card to make a purchase. Although Credit cards are amongst the most expensive credit they can be useful when on holiday or in event of emergency when you require instant funds. Credit Cards work in a similar way to overdrafts and provide short term funds for small amounts of money but for this convenience you will be required to repay these loans at high interest rates.

Personal Loans can be approved within a few days, so, if you can be patient, taking out a personal loan will meet your needs and will cost you far less.

Secured Loans vs Unsecured Loans

When you apply for a personal loan, depending on the amount you require to borrow, you will usually have a choice in selecting a secured loan or an unsecured loan.

A secured loan is a personal loan that uses the equity built up on a property or other asset that you own. Secured loans boast many benefits to the borrower such as longer repayment time and better interest rates.

An unsecured loan does not require you to secure anything against the loan. Because the risk is higher for the lender unsecured acceptance is tougher, repayment term is usually shorter and interest rates are higher. Furthermore, it can also be difficult to obtain unsecured loans for large amounts of money.

When you compare unsecured loans to secured loans you will find the main differences are the cost effectiveness for the amount of money you wish to borrow and the amount you will be required to pay back. Unsecured loans are more expensive and lenders have tighter criteria.

The cost effective Loan

If you are looking for a loan which is cheap and easy to get regardless of your credit score and you have enough equity available in your property then a secured loan is for you.

Unsecured Business Loans

There is absolutely no usage restriction on the money, provided under the loan. You can use the money to start a business or expand it further. You may also purchase raw material, furniture, land or any other asset. Also you can use the money to pay wages or clear any outstanding debts. The amount of money that you get is fully dependent on your repayment capabilities.

Before you go out to avail these loans for your business, you have to prepare certain things. You have to come up with a feasible business plan. The plan should be clear and should show that your business is capable of growing. In short the plan should impress the lender and make him/her believe that your business will surely earn profit.

You are also required to provide certain details to the lenders. The details include the amount of money required under the unsecured business loans. You also have to mention the purpose for which you want to take the loan. Also you need to provide the lenders with your latest bank statements and the latest revenue details. This information is necessary for the lender to assess your repaying abilities.

A single look into the market will tell you that there are many lenders that can provide you with these unsecured business loans. You need to shop around and check different deals. With different lenders coming up in both the online and offline markets, chances are you can get really good competitive deals. A little research in the market can get you good interest rates and can help you to acquire funds easily.

So the only advice for you is to start looking for the available options and check each of them to your satisfaction. You should settle on those unsecured business loans deals that meet all your requirements.