Various challenges are expected from first-time borrowers when borrowing. For example, you still need to trick the lender into believing that despite your creditworthiness or other financial condition, you can easily repay the loan. Also, the stigma of rejection is a common problem that most first-time borrowers encounter.
Because of this, you need to choose the loan option that you think best suits your situation. If you are a first time borrower, it is best to explore all of the options available. To make this easier, the following are the best personal loan options to consider:
Secured personal loan
A secured personal loan is a loan that is backed by collateral. Lenders such as Credit Ninja You will need this collateral to protect the loan taken out, especially if you have poor credit history. Giving credit to individuals with poor credit ratings is a huge risk for lenders. Therefore, they ask for collateral to reduce this risk.
If you default on the loan, the lender has the right to repossess the collateral in payment for the money you owe them. The real estate used as collateral includes various valuables such as a house, a car or jewelry.
A secured loan is an installment loan, which means that you can pay it off over a longer period of time. Regardless of whether you prefer a longer or shorter loan term, it is best to always speak to your lender. See if they can customize a program based on your capacity.
Payday or cash advance loans
Unlike an installment loan, a payday or cash advance is a short-term loan that requires the borrower to settle the debt on the next payday. The principal amount of a payday loan or cash advance is usually a percentage of the amount on your next paycheck.
This type of loan has a higher interest rate in addition to the short term repayment schedule. However, if you are a first time borrower or have bad credit, this would be your best option for a quick cash advance.
Payday loans can only be purchased from direct lenders or payday lenders themselves. Banks and other traditional lenders do not offer this loan option to their customers. Hence, when considering this loan, the first thing to do is to check with your lender to see if the option is available.
A third party secures a guaranteed loan called a surety. The surety is responsible for paying the loan if the main borrower defaults on the loan. The guarantee can be limited or unlimited.
With a limited guarantee, the guarantor can only pay part of the loan, while an open-ended guarantee requires the guarantor to pay the entire loan amount. There are three types of guaranteed loans that you need to know about.
The first is the personal surety, which means that a person is the surety and will be held liable for the loan in the event of default. The second guaranteed loan is the bank guarantee, which means that a commercial bank is the guarantor for the loan and is responsible for paying the loan if the borrower defaults.
The third type of guaranteed loan is a financial guarantee, which is similar to a bank guarantee. A financial institution, like an insurance company, is required to pay the loan if the main borrower fails to do so.
Credit card cash advance credit
If you already have a credit card, it means you already have an active credit history. A credit card advance is a short-term loan offered by your credit card provider. Here you take a cash advance against your credit line.
For this reason, credit cards are preferred by many as they not only allow you to make cashless purchases but also to receive cash. Additionally, there are a few ways that you can acquire money against your credit card’s limit of credit.
The most popular and easiest way is through an ATM. You need to go to the nearest ATM and use your credit card just as you would withdraw money with a debit card. Another way to get a cash advance is to go to a bank and apply for a cash advance on your credit card.
You can also get a cash advance through a convenience check. For example, your credit card can come with a convenience check. This allows you to write yourself a check against your credit card and withdraw it or deposit it directly into your bank account.
While there are quite a few loan options available for first-time borrowers or those with poor credit ratings, it is still best to take your time Build your credit rating. A good credit rating gives you even more and better options.
To summarize it
Always remember that any loan you apply for will have an impact on your credit score, especially if the application is denied. Each application submitted will deduct five points from your creditworthiness. Therefore, it is helpful to always choose the best loan option and only apply if you are certain that you will qualify for the loan.