If you are taking a loan then you need to understand all about the loan before you are committed to taking the loan. There are different types of loans and you need to do a careful and proper evaluation before you decide to sign up. To do this, there are various metrics you need to consider. Metrics are specific numbers related to the loan. These need to be known to understand more about the loan. These metrics will help you evaluate a loan and understand all about it.
There are different types of loans that you can get, that include:
- Home loan: or home mortgage is a loan that you take for buying a home on a mortgage. You need to make a down payment and you will be granted a loan to buy the home. You need to make the mortgage payment every month until the loan is cleared. The mortgage would be with the lender and non-payment of the loan would lead to the lender taking over the home.
- Business loan: This is a loan meant for businesses. Entrepreneurs who want to start a business or industry need capital. This loan is given to start a business and a project proposal has to be given explaining how the business will function and get profits. Based on this, the loan would be given. Collateral security and guarantors may be required before the loan is approved.
- Automobile loan: This is a car loan taken to buy an automobile. The loan is given with a down payment and a fixed payment with interest to be paid every month until the loan is cleared. The car mortgage would remain with the lender until the loan is cleared. If the loan is not cleared, then the car would be repossessed by the lender.
- Student loans: These are loans given for students to complete their college education. The loans are usually given without any down payment and have the least interest on offer. Federal loans have the best interest rates and can be repaid after the student gets a job. Private lenders also offer student loans.
- Personal loans: These are loans given to fulfill any personal need. The loan generally has the most stringent conditions and the highest interest rate to be paid. The loans have a lot of paper work to be completed. This is done to ensure that the loans are repaid. Credit score is verified before lending them money.
- Payday loans: These are a type of short-term loans Michigan that are lent for people who are working and earn a salaried amount. The loan is given on the basis of the employment of the applicant with the assurance that the loan would be repaid on the next payday (14 to 31 days from taking the loan). The loans have a higher interest rate.
Deciding the loan to be taken
The loan to be taken depends on its purpose. If you want to buy a home, then obviously you need a home loan. If, however, you need money for some personal need, like for instance to repay someone else or meet an urgent requirement, then you can consider a personal loan. The problem with getting a personal loan is that the requirements are stringent, including a credit score verification. This becomes a problem for those who have a poor credit score.
The documentation and procedures are cumbersome and takes a lot of time. Payday loans, on the other hand, allow a loan to be obtained very quickly. The entire process can be completed when you get it online through a payday locker, which is an online platform. It is the most convenient form of loans for those who need money urgently. If you need a quick loan, then you need to evaluate the options before you. This could be personal loans from a bank, credit union, or financial institution. The other option is payday loans and there are various lenders to choose from.
Metrics and methods
Before you sign up for a loan, you need to evaluate them. Consider all loan options, including Payday loans Michigan and analyze them on the metrics given below:
APR stands for Annual Percentage Rate, which is the cost of money borrowed represented in the form of an annual cost. For example, if you borrow $1,000 for a period of three years and you pay an annual interest of 10%, then the APR works out to be 19.9%. Before taking a loan, consider the APR, which is the key metric. The APR for payday loans range from 391% to 521%. You need to compare between different lenders before deciding.
- Payback amount
The payback amount is the amount you need to pay to the lender. This includes the amount borrowed and the principal. If you take a payday loan for $1000, you may need to pay around $150 to $200 as interest. The amount to be repaid could be $1150 to $1200. There may be other charges like processing fees and so on. You need to carefully evaluate this before signing on.
- Loan processing time
This is an important metric to consider. The time taken to process the loan and approve it until it reaches your bank account is important, particularly if you are in a hurry. You cannot wait for too long, when your need is an emergency. Generally, payday loans are processed very quickly. Compare the processing times before you decide.
- Repayment time and penalties
One of the last metrics to consider the time to repay the loan, which varies from 14 to 31 days and how repayment is done (direct debit, check, etc.). Find out this metric before you take a decision. You need to consider what the penalties are for non-repayment on time. This is important.
The four metrics given above can help you easily choose between personal loans and payday loans. Compare all the metrics keeping your need in mind before you make a final decision.
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Harold Mitchell is part of the editorial team at the Payday Locker. The latter offers Online Payday Loans Michigan. Payday locker helps you connect with a lender and get money instantly.