All about borrowing money
Loans are a fact of life. Whether you want to buy a house, get a new car or start your own business, you'll need a loan to get you there. Sometimes, money is tight at the end of the month, and quick cash loans can get you through in a pinch.
All loans are structured the same way, no matter the amount of money you're borrowing or the reason you're borrowing it. In every case, the lender gives the borrower an amount of money, which is called the principal. This principal is loaned at an agreed-upon rate of interest, which ensures the lender will profit from the transaction. The lender then amortizes the loan by paying back the principal plus the interest, generally in installments, until the debt has been cleared.
Types of Bank Loans
There are two main classifications of bank loans: secured loans and unsecured loans. Secured loans require collateral, which the bank will take possession of if you default on your loan payments. Banks don't take collateral if you're getting an unsecured loan; the only thing at risk if you don't pay the loan back is . Generally, unsecured bank loans are for small amounts of money. A bank won't lend a large amount without holding something as collateral.
Bank loans are commonly used to finance major purchases, start new businesses, or to invest in the hopes of turning a greater profit than the interest owed on the loan. Some banks also offer student loans and other emergency financing options.
Loans Available from Other Lenders
For fast loans involving small amounts of money, other private lenders, such as payday loan companies, offer a quick alternative. Most businesses that cash checks for a fee will also lend customers money if the customer can prove they have a regular source of income. These quick cash loans are usually for $1,000 or less.
Many such lenders are also found on the Internet. These online loans usually have slightly higher maximums, but you should only use these services sparingly and when absolutely necessary. Though they may advertise cheap loans, payday loan companies generally charge very high rates of interest. You can quickly spiral into a deep web of debt if you're irresponsible about how you borrow.