Applying For A Loan In The USA

A young lady applies for a loan online on her computer
Information About Credit And Loans In The USA
Part 1 The Introduction Of Personal Savings And Loans In The USA
Part 2 The Bank Loan And Traditional Lending In The USA
Part 3 Mortgages And Modern Types Of Loan
Part 4 Applying For A Loan In The USA

Before you take the step of borrowing money it is important to have an understanding about how loans work. If you have some basic knowledge it will help to prevent you from getting into debt and will also save you money. If you study the small print of a loan contract the costs of borrowing will be quite clear, maybe. But, most people do not have the time to read all the details and can often sign up to terms that are not suitable for their own personal circumstances. In this article we examine:

  • How loans work in the US
  • The cost of borrowing
  • Credit card loans
  • Secured and unsecured loans

So, if you get the basics right you can cut down on the costs. Lenders make money on loans by charging interest and sometimes fees. The contract that you sign will show the APR (Annual Percentage Rate) and must also provide details of any set up fees as well as showing the charges for missed or late payments. In addition, there could be penalty payments if you are fortunate enough to be able to pay off the loan early. Using an online loan calculator can help you decide whether a loan is suitable and these are an excellent tool that will show you the full cost of borrowing.

Making loan repayments

Personal loans are paid off over a set number of months or years. The interest is added to the loan each month so the monthly repayment consists of part principle and part interest payment.

An online loan calculator can help you decide whether a loan is suitable

Repaying a loan early may result in charges so, as already stated, this is another part of the contract that should be closely examined. Make sure that there are no penalties involved if you choose to make higher monthly payments or to redeem the loan completely before the end of the term.

Credit card loans

Borrowing money off a credit card is never a good idea and it is one of the most costly methods of borrowing. The high interest rates make this kind of cash loan very expensive but nevertheless many people do use their cards as a last resort.

A young couple are depicted making use of their credit card online for shopping and lending

Credit cards work differently to other loans and are called revolving credit. This means that you can continue to use a card up to the agreed borrowing limit even if you do not pay off the whole of the balance. Using credit cards for everyday living expenses can cause many financial problems and the debt could take many year to pay off.

Loan qualification

Loans are granted to customers who have a good credit score and credit history. In addition, a reputable lender will demand proof of income so that they can be sure you will be able to afford the loan. Some unethical lenders will lend money even though they are unsure about your capability to make repayments and these should be avoided.

Secured and unsecured loans

A secured loan is one that needs collateral. Most secured loans are given to homeowners when the property is the collateral. Failure to pay a secured loan can result in the house being repossessed and sold off to cover the debt. If the repossession of a home takes place and the sale amount does not cover the debt then you will still be liable to repay the remainder of the money owed.

Some unethical lenders will lend money even though they are unsure about your capability to repay and these should be avoided.

Unsecured loans are generally personal loans, payday loans or credit cards and these require no collateral. However, the regulations for payday loans are different for each state.

Conclusions – Applying for a loan

Lending has always been around and it continues to be big business. Credit is a very lucrative money maker for the companies that provide loans, credit cards, mortgages and payday loans. If you are looking for a specific type of credit, hopefully this short article will give you some pointers about what to look for and where to find a good deal.

Information About Credit And Loans In The USA
Part 1 The Introduction Of Personal Savings And Loans In The USA
Part 2 The Bank Loan And Traditional Lending In The USA
Part 3 Mortgages And Modern Types Of Loan
Part 4 Applying For A Loan In The USA

About the author

David Warren

David Warren is an expert on personal loans across the United States. His career in banking has helped make David the loans specialist that he is today. He shares his analysis and insight into the personal finance industry on onlinecreditusa.com