What Are Home Equity Loans?
A loan is when cash is lent to an individual or another company in return for repayment of principal plus interest. A secured loan can be collateralized by property like a house or it can be non-secured like a credit card. While unsecured loans are short-term, revolving loans are long-term, fixed-rate loans.
The first step in finding a secured loan is to collect a few basic facts about the individual. It’s best if the individual can provide a few current and previous addresses and perhaps their Social Security number. Most private lending institutions will ask these questions before giving any type of loan. After gathering the necessary information lenders should now evaluate the credit history of borrowers. Lenders look at a few factors like payment history, amount of debt, types of credit used and the length of time the loan was taken out.
If someone has poor credit or has borrowed money repeatedly, they may not qualify for the loan. In this case they would owe the amount of money plus interest on any outstanding balance, not including any credit cards or store charge cards. For people who qualify for a secured loan they would owe nothing on the loan until they have fully paid back the amount of money borrowed plus the interest and fees. They would then be able to borrow more money to pay off the initial loan.
Once approved, usually the loan terms include a grace period in which the borrower is allowed to make the payments on the loan without making additional payments. In most cases, if at any point during the grace period of the loan principal has not been repaid the entire loan could be considered delinquent. This means that the individual will face late payment charges and will be charged interest on any amounts not paid off within the specified time. The longer the grace period the less likely it is that the loan would be fully repaid.
If at any point during the life of the loan payments become past due, lenders may increase the loan terms to include acceleration payments. Acceleration payments are additional payments made when the balance of the loan remains beyond the date of the loan repayment. The amount of interest charged will increase by a set amount above the customary interest rate on the loan. For people with good credit it is possible that some lenders will allow borrowers to choose a single payment instead of paying all amounts separately.
Before accepting a loan a borrower should do their research on different lenders and what their terms and conditions entail. The best way to do this is through the internet. Many websites have information available regarding the different kinds of loans available. A borrower can read about the terms and conditions of loans as well as read comments from previous borrowers. A potential lender will want to see that the person has reasonable credit limits and a history of making payments on time. In addition to a potential lender will want to know if the person has experienced a bankruptcy or foreclosure in the past.