It is not uncommon today for individuals and businesses to file for a financial loan. Individual would apply for one due to the lack of funds for purchasing necessities or […]
It is not uncommon today for individuals and businesses to file for a financial loan. Individual would apply for one due to the lack of funds for purchasing necessities or for other purposes that would in one way or another make their lives more comfortable and secure. Businesses on the other hand may need additional capital or additional financial resources to cushion increasing inventory and operational expense due to increasing number of customers. These are perhaps the basic reason why these two sectors of society would file for a bank loan or any other type of loans.
Bank or business loans come in a variety of loan packages and choosing the type of loan that you may require can be a bit of a problem. This is especially true if it will be the first time for you or your business to file for one. For private individuals, a loan can either be used to purchase homes, properties, cars and in most cases to pay for a college education. For businesses, it can provide additional funding to the day to day expenses of the company. Generally, type of loans may be categorized to be fixed or variable rate loan, installment, unsecure or secured loans, and convertible loans. The common factor for all these type of loans is its repayment terms and understanding the repayment terms and condition will allow you to select the right kind of loan for you.
For private individuals, fixed rate loan is the most common type that is availed of because it keeps the same interest rate until the maturity of the loan. However the interest rate for this kind of loan may be higher than the variable rate loan. This type is normally applied to long term loans such a mortgage loan for homes, properties and even high priced vehicles simply because the monthly amortization for the loan will not fluctuate except in rare and unavoidable circumstances which is normally stipulated in the loan contract.
Variable rate loans are those whose interest rates fluctuate. The fluctuation of the interest will depend highly on the market rate or what is referred to in banking parlance as “Prime rate”. In cases such as this, amortization for this type of loan may vary each payment due date. However the interest rate for this type of loan is much lower than the fixed rate loan.
Installment loans are also one of the most common availed by most individuals. The loan is paid in equal amounts over specified period of time and repayment period is spread from six months to as much as thirty years. A loan company may classify this type of loan to be both short term and long term loan.
Finally, you have the convertible type where the loan can be altered or amended from one type of loan to another. One good example of this is a mortgage loan where the borrower can request a change of his loan from variable rate to a fixed rate type of a loan. However, most loan contract specifies that a borrower can only do this after a specific period of time have elapsed. Also this type of loan can also be categorized under flexible loans.
It is no secret that all over the world, most residential houses and the property it stands on are under a mortgage loan. This is so true for most middle […]
It is no secret that all over the world, most residential houses and the property it stands on are under a mortgage loan. This is so true for most middle income families because the only way to purchase a house and property is to have it financed by a bank and other lending institutions.
Most mortgages are availed from a large loan company such as a bank. Mortgages contain three basic components namely the loan amount, interest rate and loan term. The loan amount is the principal amount you would want to borrow and most mortgage companies or banks provide an 80% loan on the property value that you intend to purchase.
The interest rate is the amount you have to pay on the loan and this can be categorized into a fixed or flexible rate or a combination of both. The payment terms for a mortgage loan usually ranges from 10 to 30 years. These are usually referred to as long term loan. Adding up the total amount of interest based on the number of years to pay plus the principal amount will give you the overall amount of your loan.
Amortization of home loan mortgages is usually paid on a monthly basis and they are usually cut into two portions namely the principal amount and interest.
When entering into any type of loans especially a mortgage loan, the most important thing to consider is to be aware of your borrowing capacity and your capacity to pay.
There are online tools on the net that you can avail of to calculate these factors. However you must understand that these will not actually give you an exact answer but the mortgage company on the other hand will take into account several specific factors relative to your credit and income history to calculate the amount loan that they can provide for you. The result from this assessment will tell you the amount of money you can borrow.
The factors that the lending companies usually take into consideration are your incomes, current and previous liabilities which include your credit cards, the number of dependents you have and any other incidental liabilities like home or apartment rentals and vehicle payment schemes. Not all lending companies have the same protocol when reviewing a loan application. As a matter of fact, almost all of them have different procedures in approving a mortgage or bank loan application.