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Loans and Micro Loans
What is a
loan?
In many cases,
small business loans, corporate loans and
personal loans can be an excellent source of
financing.
A loan is money
you borrow and agree to pay back at an agreed rate of interest
and time period. Interest
rates on that loan are fixed at the outset, so you
know exactly how much money you are paying back
for your loan each month.
In the past, people tended to go to their own bank for
common loans and various micro loans. But in recent years, competition between lenders means that it is possible to go to a far wider variety of sources for a loan, thus bringing down the overall cost.
There are two main types of
loan and micro loans:
Unsecured
Loans
These types of loan
are not tied to any item, such as your home. If you do not pay it off, you may face a poor credit rating in future, but you will not put your property in jeopardy. Of course, this means unsecured loans are more
expensive since the lender is taking more of a risk.
Secured
Loans
A secured loan is usually tied to your
home or other item. If you do not repay your
secured loan, you could face eviction. This makes secured loan rates cheaper, in many cases, than unsecured
loans.
Things you
should know about loans
Loans are like mortgages in the sense that, at first, you are mostly paying back interest and only further down the line are greater amounts of your capital paid off.
But there is one feature of most loans that is
different to mortgages: interest is set at the outset.
Also, this means that if you repay the capital you owe
ahead of time, you do not avoid paying any future
interest as a result: you will be required to pay back
some of the outstanding interest too. This can sometimes prove to be unexpectedly expensive. Not all loan providers operate in this way, so it makes sense to check.
The other thing to consider is that, unlike other types of credit, for example credit cards, you are required to keep paying a loan off regardless of your financial circumstances.
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Featured Directory
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Canadian
Subsidy Directory
Updated
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