Your Banking 4 U Info
Welcome to Your Banking 4 U Info!

Business Articles


Facts You Should Know About Loan Types
By Prakash Menon


When you set out to borrow, you often come across terms like unsecured loans, revolving loans, adjustable rate loans, etc. While these terms are more or less self-explanatory, it is still useful to be clear on their exact meanings and what they imply before you finalize a loan contract.

Unsecured versus secured loans

As the name implies, a secured loan is one where you offer collateral of some kind against the loan. That means, if you default on the loan, the lender has the right (but not the obligation) to take possession of the asset you have pledged.

In most cases, this asset would be what the lender has financed. For example, when you take a home loan, you offer the home as collateral.

There may also be cases where you may need to offer additional collateral over and above the asset that is being financed. This happens, for example, when the lender is financing close to 100% of an asset that is prone to rapid reduction in market value. In such cases, the lender may insist on your putting up another asset so as to provide a reasonable margin of protection to the lender in case of default.

Unsecured loans are those where such collateral arrangements do not exist. These loans are granted based on your credit standing, ability to repay and other factors.

All other factors being equal, a secured loan may be offered at a lower interest rate as compared to an unsecured loan. That?s obviously because of the lower risk associated with the secured loan -- should you default, the lender has an asset to fall back on. Sometimes you end up with a choice -- you can take a loan on either a secured on an unsecured basis. The difference in APRs may be quite significant in such cases. However, being offered a choice like this is comparatively rare in consumer financing, but may exist in financing businesses.

Installment versus revolving loans

A revolving loan is one where you have access to a continuous source of credit, up to a pre-determined credit limit. If the limit is say, $10,000, you can borrow any amount up to $10,000. And typically, you can repay all or part of the amount you borrowed at a time of your choosing, within the overall tenor of the loan.

You pay interest only on the amount you borrow for the time you borrow it. Sometimes, banks may charge a commitment fee for making a revolving line of credit available to you. This fee is usually charged on the average unutilized amount of your limit.

You can also re-borrow the amount you have repaid. In effect, you have a loan that`s always available to you on demand.

Unlike revolving loans, installment loans have a fixed repayment schedule. In most cases, the full amount of the loan is drawn down (i.e., borrowed) at once and both repayment schedule and amounts are fixed in advance. You do not have the option to re-borrow the amount that has been repaid.

Adjustable rate versus fixed rate loans

A fixed rate loan is one where the interest rate charged is fixed for the entire duration of the loan. The advantage is that you are immune to fluctuations in interest rates and can budget your cash outflows precisely. The disadvantage to you (the borrower) is that should interest rates fall, you lose in terms of opportunity costs. That is, you could have obtained a lower interest rate had you opted for an adjustable rate loan.

In practice, you can always choose to refinance the fixed rate loan at a lower rate if interest rates fall sharply enough to justify it. Bear in mind that your current lender may charge a pre-payment fee if you choose to repay before due date. So the difference in interest rates between your old fixed rate loan and the new loan should be large enough to justify a switch.

An adjustable rate loan is one where the interest charged fluctuates in line with a benchmark rate. This benchmark rate is usually the Prime Rate, which is what the US Treasury charges its prime (or best) borrowers. The advantage of an adjustable rate (or floating rate) loan is that what you are paying is more or less in line with the market. If interest rates decline, so do your costs and vice versa. The disadvantage is that your cash outflows for interest are unpredictable.

As a borrower, if you hold the view that interest rates are going to decline, it is best to opt for an adjustable rate loan. But arriving at the correct view consistently is easier said than done. Predicting interest rates is a game where even professional market participants and institutions frequently go wrong.

If it is important to you to be able to budget for your interest obligations in advance, a fixed rate loan may be the best choice. After all, you can refinance it should the interest rates fall significantly.

Keeping these basic facts in mind should help you make more informed borrowing decisions.

For more information about this article and/or the author visit http://www.payday-cashadvances.net

For more information, news and articles see:

Custom Clearance - Custom Clearance
...e moment because you find yourself worrying about the consignment of rugs that are being shipped in from Cairo? Do you find the whole process of Custom Clearancea bit of a muddle and struggle to unde...
Visit Custom Clearance...

Sales Techniques - Sales Techniques
...ets one person apart from another? Confidence will play a part and an ability to build an immediate bond with the potential buyer will be a huge help. Yet sales folk can`t always rely on their natu...
Visit Sales Techniques...

Tape Storage - Tape Storage
...d tape storage facilities provide business with the ideal answer when they want to create additional room within the office setting. Old tapes can be taken away from the company and they can be store...
Visit Tape Storage...

Online Market Research - Online Market Research
...esearch is a term given to the process of gathering, recording and processing of data about marketing exercises such as advertising or public relations. With large amounts of money being spent by comp...
Visit Online Market Research...

Coffee Shop Menu Printers - Coffee Shop Menu Printers
... boring when I go into coffee shops because I always tend to order the same thing. I might peruse the menu but I always order a Latte in the end. This has nothing to do with the way that the menu is...
Visit Coffee Shop Menu Printers...

Presentation Binders - Presentation Binders
...r game or drinking a bottle of wine with friends. Many people like me have a passion for writing; it is a way of expressing ourselves, passing the time and using our imagination. I have never consider...
Visit Presentation Binders...

Lashing Equipment - Lashing Equipment
...o mean securing a load inside a container in order to prevent it from sliding or falling. Lashing is a widely used in industry today. There are different types of lashing- direct lashing, diagonal las...
Visit Lashing Equipment...

Platform Trucks - Platform Trucks
...ce ages and have only changed in appearance. They do not have their traditional looks any longer, but they still perform the way did years ago. These platform devices have been built with a flat base ...
Visit Platform Trucks...

Precast Concrete - Precast Concrete
...te on building sites around the country. Not only can building sites put Precast Concrete to good use though, other types of settings can create suitable storage solutions when these products are bro...
Visit Precast Concrete...

Bespoke Lighting - Bespoke Lighting
... of an interior setting just by altering the lighting layout. Careful consideration to the lighting can bring about some quite remarkable results. Consultation with lighting experts can help to pro...
Visit Bespoke Lighting...

Locksmiths Northampton - Locksmiths Northampton
...emergency needing a locksmith, then all you need to do is just type locksmiths Northampton into any search engine you are using, to help you find a reliable locksmith that is based near you. Locksmith...
Visit Locksmiths Northampton...

Plant Management - Plant Management
...ustry relies heavily on the plant that it uses and at any one time there can be many items of plant on sites around the country. For some companies this can prove to be quite a headache as they try t...
Visit Plant Management...

Pr Surveys - Pr Surveys
...usiness to have a nationwide product or service, then you may be interested to know just what the publics opinions of your product or business are. But how do you go about learning such facts? you cou...
Visit Pr Surveys...

Architectural Lighting - Architectural Lighting
.... I think it started when we redecorated the dining room and fitted new light fittings within. The next room to get a makeover was the master bedroom and again, we selected a completely different li...
Visit Architectural Lighting...

Folding Trolley - Folding Trolley
...e loads or even small loads repeatedly from one location to another. This is why people have started to use tools that have been manufactured for the purpose of making such tasks more convenient and e...
Visit Folding Trolley...

Cd Duplication - Cd Duplication
... copies in a hurry. No need to worry. Cd duplication is now easily accessible over the net. There are some fabulous companies out there who offer you a professional, reliable service for a reasonable ...
Visit Cd Duplication...

Contract Headboards - Contract Headboards
...s fabrics and colours.All the fabric choices comply to BS 5852(1990) Part 2 Ignition Source 5 (CRIB 5).Faux leather and poor wool have recently become popular choices .contract headboards are used in ...
Visit Contract Headboards...

Exhibition Contractors - Exhibition Contractors
...ce providers are called Exhibition Contractors. There are many companies and individuals providing services that include all kinds of resources for an exhibition of a single item or more than one item...
Visit Exhibition Contractors...

Headboards - Headboards
...bly spend a third of our lives in bed, so why not have a comfortable and beautiful bed to sleep in? Why not have the bed you have dreamed of and make your bedroom stunning? One way of doing this is to...
Visit Headboards...

Sea Freight - Sea Freight
...t of goods to Spain in the shortest possible time and want a freight forwarding firm to handle the consignment on your behalf? Not sure about global freight policies and need the shipping team to tak...
Visit Sea Freight...

Structured Deposits - Structured Deposits
...ncial advisors would take their time to research the latest structured deposits for their clients. What would be the point in consulting an advisor if they failed to compare and contrast the deposits...
Visit Structured Deposits...

Parking Permits - Parking Permits
...eir employees with Parking permitsthat enable them to park on company premises. In built-up areas parking can be a problem and pricey public car parks can be rather off-putting. They might be tempted...
Visit Parking Permits...

Safe Repairs - Safe Repairs
... work. Because of this it is vitally important that it is well maintained and is always in the best possible condition. If you are having problems with your safe, and need a highly skilled engineer to...
Visit Safe Repairs...

Structured Products - Structured Products
...arch the latest structured productsthat are on the market? Do they compare and contrast, analyse and evaluate the products that will be suitable for their clients? If they take their role seriously ...
Visit Structured Products...

Fire Suppression - Fire Suppression
... when it is raging out of control and it will devour anything that is in its path. The bush fires in Australia claimed numerous lives recently and over in America, California has been plagued with a ...
Visit Fire Suppression...

Display Cubes - Display Cubes
...ects. They serve as protection for objects on display. These Display Cubes are very easy to construct. They can also be altered at any time to create a larger display cube. You can assemble and disass...
Visit Display Cubes...

Presentation Skills - Presentation Skills
...with a room full of potential new clients would you be able to handle the pressure? Would you thrive in this scenario and put your presentation skills to the test, or would you much rather hide away ...
Visit Presentation Skills...

Plant Hire Software - Plant Hire Software
...trying to keep a track of it at all times. If you are a site manager and are responsible for the movement of hire equipment from one site to another, I`m guessing that it can prove to be quite a bala...
Visit Plant Hire Software...

Cd Printing - Cd Printing
...rom you it has become increasingly popular in today`s work place to send the information on a cd. It does not matter whether you`re sending out promotional material or end of year reports. You want to...
Visit Cd Printing...

Document Storage - Document Storage
...Shelves fit to busting with old files? Folders scattered all over the floor? Rapidly running out of room for file storage and need a solution fast? Have you thought about outsourcing your document ...
Visit Document Storage...

Retaining Walls - Retaining Walls
...t basis. A host of Retaining walls are used to hold back soil from a building that`s being erected. Typically the Retaining walls are made from a number of materials and pre-cast concrete is one suc...
Visit Retaining Walls...

Vehicle Fire Suppression - Vehicle Fire Suppression
...system using monoammonium phosphate base-a dry chemical agent used to control most fires. This particular system is designed for large, off-road type construction and mining equipment for example; lar...
Visit Vehicle Fire Suppression...

Polypropylene Ring Binders - Polypropylene Ring Binders
...he stationery department of a local school and one of the most popular items I get asked for by the teaching staff are polypropylene ring binders. I seem to be ordering polypropylene ring binders nea...
Visit Polypropylene Ring Binders...

The Taxation People - Article01.html
...id too much tax! The Taxation People, are a forward thinking online accountancy service that specialise in helping people who might be eligible for a tax refund. They offer a online service, with a s...
Visit The Taxation People...

Exhibition Stands - Exhibition Stands
... with Exhibition stands than without them. These stands come in all kinds of varieties with different designs, sizes, shapes and styles suitable for any size, kind and style of exhibition on any scale...
Visit Exhibition Stands...

Window Cling - Window Cling
... Are you trying to find a unique way of getting your brand or your company noticed over a larger distance? Then why not have a look at having your brand printed on to a range of window cling vinyl sti...
Visit Window Cling...

Estate Agents Display - Estate Agents Display
...methods cover a wide array of systems. In other words, estate methods of displaying advertisements of models include different kinds of shelving. estate agents display may consist of lighted signboard...
Visit Estate Agents Display...

Lifting Equipment - Lifting Equipment
...been put in place by the government to protect employees from the dangers of Lifting Equipment. The Regulations aim to reduce the risks to people`s health and provide safety from lifting. Generally, t...
Visit Lifting Equipment...

Restaurant Menu Printing - Restaurant Menu Printing
...oy a leisurely lunch in an Italian restaurant. I love it when you first sit down at the table and peruse the menu carefully. There`s an air of anticipation about what is to follow as you look forwar...
Visit Restaurant Menu Printing...

The Taxation People - Article03.html
...y people in the UK, in fact as many as one in three UK taxpayers have paid too much tax! A new `No Win No Fee` tax refund service has just been launched by Greer & Taylor LLP on a dedicated new webs...
Visit The Taxation People...


Click For More Detailed Information on:
your aggregate trade ::my business industry ::best commercial 4 you ::big commercial pro ::new trade for you online ::family business live ::big biz store ::family video business ::family store company ::family site company

Home  |  About Us  |  Contact Us  |  Articles  |  Special Reports  |  Links  |  Site Map

Copyright © 2003-2012. All Rights Reserved.


Valid CSS!