Alternatives To High-Cost Loans
Borrowing can be expensive although it is not supposed to be that costly. When your loan is approved, the first thing to do is how to manage your interest rate and processing fees by getting them as low as possible. To achieve this, chose wisely between the different types of loan.
Sometimes a high-interest rate loan may be the only option available for you, but you need to look for less expensive ways to get the loan. Such strategies will really help you to make the debt burden more affordable. These types of loan can be a good alternative to high-cost loans.
These types of loans do not require collaterals for approval, hence the name signature loans. They come with low-interest rates which are often fixed throughout the repayment periods. So you’ll not be surprised with increasing payments.
They are also cheaper than credit cards, title loans, and payday loans. Their processing fees are also low or even non-existent. The beauty of these loans is that you can borrow any amount in one lump sum to pay off your obligations. You’ll then amortize your loan with monthly installments until it is paid off.
Besides, you may get well financially at any time before you finish paying off the debt, you can still pay the remaining balance in a single installment without a penalty. Good credit score and sufficient amount of income is a requirement before you’re approved to get these loans.
Person to person loans differs from personal loans in that you borrow from other individuals instead of banks or credit unions. These individuals can be family members, friends or strangers who lend through person-to-person websites.
These type of loan are not very strict on having a good credit score and sufficient amount of income. Although these type of loan are more relaxed, it’s good to take care of the relationships with your lender. So put it in writing to make sure everything work out well.
This loan is ideal for people with perfect credit scores. Balance transfers allow for low-interest rates on borrowings. However, you need to open a new account or maintain a checking account with your bank. This option works best for short term loan.
In case you are unable to pay your loan within the promotional period, you lose all the benefits which turn into high-interest debt. Therefore, if you intend to use balance transfers, watch out the length of the promotional period and any other fees that might wipe out all the benefits.
This type of loan is ideal when you have sufficient equity in your home. Remember your home serves as the guarantee of payment. But because a home equity locks your home until you pay off the loan, you risk losing your home in the event you can afford to make the regular payments towards the loan. This risk is not worth taking! Instead, unsecured loans like the ones discussed above can work better.
On top of this, you will have to pay closing costs for your home equity loan. Such costs may end up making the overall debt more expensive pushing you into serious financial crisis. Before borrowing any of these loans, sit down and review both the benefit and the drawbacks to make sure you save as much as you can in paying off your debts.