by TheTruthAbout…

Basics of a Personal Loan

Are you in need of some extra money? Sometimes you just have to spend the money that you don’t have. There are many people that are turning down the credit cards and turning to small, closed-end, unsecured loans instead.

Approximately 1/5 of all nonmortgage installment loans are personal loans, says Jane C. Yoa, managing director for surveys and statistics for the American Bankers Association. “It’s a product that banks are finding a demand for in the market,” she says.

Many banks don’t advertise that they offer unsecured loans because they are not as profitable as other loans. They bank would rather offer a credit card because it is a long term commitment, ongoing in many cases.

Using a credit card for short-term loans isn’t the best option for the typical borrower. The high interest rate can accumulate more in interest payments. Plus, you must be very disciplined to only use the card for that loan. You have to pay it off like a loan; minimum payments could take you decades.

First, you need to decide how much money you really need. Look for the least amount of money that will make everything work out. Look at your credit situation and decide if you truly can afford one more loan. If you don’t have an emergency fund, you may find that you have few other options.

Once you know that you will need to take out a loan, start shopping around. Terms can vary and you want to find the best rate possible. Call around and talk to all the banks in your area, plus some national lenders. Don’t just go to a payday lender, talk with your bank or credit union first.

What kind of rates should you look for? Two year personal bank loans are averaging above 11.8% for interest rates. Credit unions may offer better rates and terms than banks, because they often are non-profit institutions.

Short-term unsecured loans can be found at 96% of all credit unions, and many make loans in amounts less than 0. Most people borrow an average of ,300. Many loans under 0 can be made with a quick limited credit check.

When it comes to your terms, look at the total cost of the credit, not just the monthly payments. While you may want to pay the least amount possible per month, a longer payback period means you pay much more in interest.

Look for any hidden fees and charges. You don’t want to pay for credit insurance, buying clubs or other extra fees. If you don’t understand what a fee is going towards, make the loan officer explain it. Ask about each charge and fee.

Read everything carefully before you sign it. If you are told something different than what is in writing, only trust the writing. Once you have signed something, any verbal conversations mean nothing. You have no agreements unless they are in writing.

Don’t let the officer talk you into borrowing more money than you need. Recently a loan officer offered me ,000 more than I was asking to borrow. I didn’t need the temptation, the added interest costs or the extra debt, so I politely refused. Many officers receive a commission based on the loans they approve. Know what you need to borrow and stick with that amount.

Often, the bank will offer you a credit card instead of an unsecured loan. This isn’t a great idea. The rates aren’t fixed and can change during the course of the loan. Credit cards are considered revolving credit, which means you have no set repayment date. It might sound attractive, but in two years you could be paying 23% interest. Can you afford the risk? Instead, ask for a specific loan amount with a fixed interest rate and a repayment schedule.

And finally, start saving! Next time you won’t need to take out a loan if you already have the money in a savings account. While you are at the bank, go ahead and set it up.

The SBA Lending Industry will experience major changes once limits are raised for 7(a) and 504 loans. The nations largest SBA lenders and independent community bankers need to know the changes. Panel: Erik Daniels, Sr. Vice President & National Sales Manager , US Bank #2 SBA 7(a) Lender Nationwide Erik Daniels is senior vice president and national sales manager of US Bank’s SBA division. In 2009 US Bank was the #2 SBA lender nationally. Erik has more than 18 years of small business lending experience in the areas of small business and bank consulting, credit, sales management, and division management. Kurt Chilcott, President & CEO, CDC Small Business Finance #1 CDC Nationwide Mr. Chilcott is a board member of NAGGL and a past chairman of the International Economic Development Council and a past chairman of NADCO. For 25 years, he has developed and led innovative and successful organizations and programs in the public and not-for-profit sectors. Under Chilcott’s leadership, the San Diego-headquartered CDC Small Business Finance has experienced extraordinary growth in its offices throughout California, Arizona and Nevada. Larry Hardee, Panama City, FL Larry Hardee has over seven years experience in the direct selling of SBA loans. Larry Hardee previously was a business development officer for Business Loan Express. SBA Stimulus II Provisions: • Increase 7(a) loan limit from million to million • Increase the 7(a) loan guaranty to a maximum of .5 million (90 …
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