Alternative to Loans (2017 Update)

Alternative to Loans (2017 Update)

Advice, Business, Current Affairs, Finance, Moneylender, News

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.

Signature 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

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.

Balance Transfers

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.

Home Equity

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.

For more information on loan, feel free to visit the top licensed moneylender Singapore, or alternatively, give us a call.

Working Capital Loan (2017 Update)

Working Capital Loan (2017 Update)

Advice, Business, Current Affairs, Finance, Moneylender, News, Uncategorized

Working Capital Loan

Any business whether big or small, struggling or efficient requires a working capital. This amount depends on the strength of the business. This too brings us to the question: What is working capital and why do business require it? What is a working capital loan?

Net Working Capital

Net Working capital is defined as the excess of current assets over current liability. This excludes any bank finance. Both the promoters and a working capital loan funds this new working capital.

Just to make things clearer, any asset on the balance sheet which could be converted into cash in one year or one operating cycle is classifies it as a current asset. Also, any liability on the balance sheet which is repayable in a year or one operating cycle is classified as a current liability. For example, short term bank deposit is a current asset and a working capital loan is a current liability.

Net Working Capital is mathematically defined as capital + long term loans – fixed assets – non current assets – intangibles. Net working capital is a measure of the promoters stake in day to day operations of the business. It also gives an idea about diversion of funds by the unit.

Uses of Working Capital Loan

During day to day operations of the unit blocks up some amount of funds. The uses for this fund include stocks, raw materials, semi finished goods, consumables and receivables. Working capital is the monetization of these current assets by taking a working capital loan against pledged to the debtors of these assets.

Not all current assets can be pledged to debtors and working capital loan cannot be availed against all assets. The bank may provide working capital loan based on its assessment of the requirements of the unit. Working capital loan may carry a fixed or floating rate of interest and is generally repayable in one calendar year or one operating cycle. A bank may subject a loan to restrictive covenants as per its assessment like ceiling on market credit, ceiling in new investments and others.

Almost every company requires a capital loan as many promoters are unwilling to reduce their stake in the company by bringing in equity infusion from new partners. Also, the interest rate for working capital loans is generally less than the rate at which credit is available in the market.

Advantages and Disadvantages

A working capital loan enables a company to monetize its assets at a competitive rate. At the same time, it provides an avenue to increase its business. Though it has many advantages there are also some downsides. For example, irrespective of the limit, one generally pledges all current assets to the bank. Also, the bank may impose certain conditions on the management in running the business. These conditions may interfere in day to day business decisions. In the worse cases, the bank may even takeover the management of the unit.

You may find out more about working capital loans from a Licensed Moneylender. A Licensed Moneylender will be able to provide you with relevant advice, so do not hesitate to drop us a message!