Loans

Both debt and equity financing have a place in small business finance. When a company is just getting off the ground, debt funding, which includes loans, can be tough. Instead, start-up companies may have to rely on the owner’s savings or loans from friends or family for their early funding. Short-term business loans or other forms of short-term funding become necessary when the company has been in operation for a year or more.

What is the definition of a short-term loan?

A short term loan is one that is taken out to meet a short-term personal or business capital requirement. Because it is a form of credit, it entails repaying the principal amount plus interest by a specified due date, which is normally one year after the loan is obtained.

Short-Term Loan Characteristics

Short-term loans are so named because they must be repaid in a short period of time. It must be paid off within six to a year – at most, 18 months – in most situations. Any loan with a term longer than that is referred to as a medium or long-term loan.

Long-term loans can run anything from a few months to 25 years. Some short-term loans don’t have a set payment schedule or a deadline. They just permit the borrower to repay the debt at his or her own speed.

Short-Term Loans: What They Are and How They Work

Short-term loans occur in a variety of shapes and sizes, as shown below:

1. Cash advances from merchants

This form of the short term loan is technically a cash advance, but it functions similarly to a loan. The lender provides the borrower with the funds he or she requires. Allowing the lender access to the borrower’s credit facility allows the borrower to make loan payments.

2. Access to credit lines

Using a company credit card is similar to using a line of credit. A credit limit is established, and the company can draw on the line of credit as needed. It makes monthly installment payments on whatever loan amount has been taken out.

3. Cash advance loans

Payday loans are short-term emergency loans that are relatively simple to get. They’re available from even high-street lenders. The disadvantage is that when the borrower’s payday arrives, the full loan amount, plus interest, must be paid in one big sum.

4. Loans taken out on the internet or in installments

It’s also extremely simple to obtain a short-term loan because the entire process is completed online, from application to approval. The money is wired to the borrower’s bank account minutes after the loan is approved.

• Contact customer service

Another option is for the consumer to look up their lender’s customer service number, call it, and ask for assistance in applying for a short-term loan. The staff will then guide you through the application process, whether you apply online or using the mobile app.

conclusion

The existence of short-term funding for existing small firms is critical to the effective operation of our economy. Small enterprises cannot function without short-term financing. They are unable to purchase inventory, meet working capital requirements, or increase their customer base or processes.

Ravi was looking forward to buying his own house. He had planned to take a home loan for the same. However, he was aware that lenders reject many loan applications, adversely affecting their credit score. Though he was ready to avail a home loan, he was wondering if his loan would be approved or not.

If you have been planning to take a home loan, and have the same doubt, here are some ways that can help increase your chances of a home loan approval:

Ensure you have a good credit score

A credit score is a reflection of your creditworthiness score above 700 is considered favourable for a home loan. A lower credit score can lead to rejection of your loan application. Similarly, a high credit score can improve the chances of loan approval and help you negotiate on the interest rates.

Therefore, ensure to check the credit score before you apply for the loan. If you have a poor credit score, it would be best to wait for a few months until your score is improved.

Pay a higher down payment

Experts opine that you can help expedite the process of a home loan by paying a higher down payment. Paying more from your pocket reduces the loan to value ratio. It also reduces the risk factor for lenders. In addition, you should reveal all the sources of income, monthly payments and obligations while applying, to help the lender get a clear picture of your financial standing.

Opt for a joint home loan

Your loan application can be rejected if you fail to meet the eligibility. If you are unable to fulfil the eligibility criteria of the lender, you can opt for a joint loan. Have a co-applicant who has a good credit score and has a stable income. You can take a joint loan with your spouse, parents and siblings. Having a co-applicant can significantly improve the chances of home loan approval. It can also help you earn a higher loan amount.

Ensuring accuracy of documents

Incomplete document submission is one of the major reasons for loan applications getting rejected. Ensure that you have all your documents handy when you apply for the loan. Moreover, the documents should be duly filed with accurate information. You can ask the lender representative to help you with documentation. Carefully fill the form, making no mistakes, especially when entering figures.

Opt for ready to move houses

The lender might be hesitant to give you a loan for an under-construction property, as there is always a doubt about the completion of the project. Instead, avail a home loan for ready to move property or houses, which are in their near completion stage. Even if you do buy an under-construction property, ensure that the developer or builder is credible and has a good track record.

Doing some homework on your part would help increase the chances of your loan approval. Check your home loan eligibility online by using a home loan eligibility calculator. Alternatively, availing a pre-approved home loan can also help you get your application approved instantly.

Seasoned finance experts are familiar with the uses of legal money lender Singapore loans for their personal financial needs. Yet, for the layman on the street, we are naturally hesitant to work with a private money lender. As such, we have gathered insights from the experts on how you to can utilize personal loans to your advantage.

Learning a new skill

Whether you intend to get to the next level at work or transform your love of photography into a full-time career, furthering your education can assist you get there. Learning is rewarding in the long term however costly in the short-term. A personal loan can pay for the expenses needed to give your knowledge and proficiencies an upgrade.

Centralize Financial obligation

If you have acquired a significant quantity of financial obligation on your charge card, a personal loan can be a great way to make paying down that debt more workable. This is among the most common usages for personal loans– and for good reason.

Make a Large Purchase

If you’re in the marketplace for an expensive product like a wedding ring or wedding, honeymoon, or furniture, a personal loan can quickly obtain you the money to purchase it.

Pros clarified: Personal loans offer you a flexible way to have the wedding celebration or vacation of your dreams– even if you don’t have the money up front– and fund it over time.

Cons clarified: Taking out a personal loan to cover a short lived event is a significant undertaking. You could be starting your married life with a huge amount of financial obligation or place on your own at a disadvantage when requesting a home mortgage down the line.

Alternatives: Think carefully concerning how much you can afford to pay before getting a loan of any type. Though more pricey, your credit limit on a bank card can stimulate you to spend less and more within your means. And if you’re disciplined, you might merely save up adequate money to pay for that wedding ring or holiday without tackling debt.

Why choose private loans for funding

The application process of a bank loan can inevitably be called relentless. They favor an almost ideal credit report, a tidy monetary record, description of all incoming and outbound funds, personal funds and bank statements, W2 or 1099 forms, tax records, profit and loss statements, income stubs, home mortgage payment records, a list of possessions like property and car titles, mutual funds, proof the loan isn’t a present, a comprehensive list of your debts, such as credit cards, student loans, car loans and youngster assistance repayments. Acquiring copies of these documents requires time, releases private protected information and can be a real inconvenience to provide. Foreclosure, insolvency, or less than perfect credit rating can instantly result in rejection for a loan application.

When most business owners become aware of the benefits of an SBA loan, they become eager to know more of the processes they need to go through to get the loan. In this blog post, business owners will learn about the SBA loan disbursement process.  

The first step that needs to be taken for the SBA loan disbursement process is to apply for the loan. One of the most vital parts of this process is the application. If they do not get the SBA loan application right, it might reduce their chances of eventually getting the loan.  Here is the proper way to apply to get the SBA loan disbursement process right.

Step 1:

They should ensure that the SBA has formally approved their location on their official disaster declaration list. As soon as it is confirmed that their location is part of the areas that have been declared for the SBA loan, then they become eligible to participate in the loan application. This stage is very important, it will prevent interested business owners from wasting their time.

         Step 2:

Once they are certain about their eligibility, the next thing to do is to apply for the loan. There are different ways this loan can be applied. The loan can be applied by mail, online, or onsite. But if they want to go through the fastest route, I will recommend you apply online. And aside from the fact that they will get attended to faster when they apply online, it is a safer method in a time like this where covid 19 cases are on increase on a daily basis.

         Step 3:

If the SBA loan is applied online, it will take about 30 to 40 minutes to fill out the application. When filling the application form, proper attention must be given to avoid mistakes.

         Step 4:

After the application has been sent to the SBA, one of the first things they will inspect is the credit score and the property or the machinery used as collateral.  The SBA has a loan officer who will ensure that the insurance payments and credits were well paid by the applicant before he/she confirms your eligibility. This stage is one of the most challenging stages for most business owners who do not have a good credit score in the past. To avoid being disappointed, the participant should ensure they have a good credit history.

        Step 5: 

This stage is the decision making by the SBA. It can take the SBA two to four weeks to make their decision. If the SBA approves the application they will send the loan closing documents for the applicant to sign.

        Step 6:

After the loan closing document is signed, the applicant will receive his/her first loan disbursement within five days of closing. Depending on the amount of loan that was applied, the SBA will make an initial disbursement of a percentage of the loan. Then the next thing they need to do after the first disbursement is to get a case manager to aid them to meet up with all the conditions that come with the loan and then schedule for the remaining part of the loan.

Personal loans are the most sort after financial aids because of their flexibility. They can always come to your aid when things get tough. They also give you the freedom to use the funds as you wish.

Many people opt for personal loans to sort out their financial emergencies. For this reason, many tend to overlook important things.

Keep in mind that when mistakes happen in the application process, you risk getting your loan application denied. You can also expose yourself to substantial financial risks.

To avoid being a victim, here are some personal loan mistakes to watch out for.

1.  Taking a Personal Loan before Reading the Fine Print

Because of financial emergencies, many people take personal loans without going through the fine print. If you’ve taken the same type of loan before, don’t assume that the fee that applied last time is still the same.

Personal loans attract additional charges like pre-closure, processing fees, etc. You might also incur penalties for a bounced check, late payment, and tenure extension.

You should check everything, including the documentation requirements. Take your time to read the fine print and understand all the requirements before you proceed.

2.  Not Checking Your Credit Report

You need to review your credit report before applying for personal loans to identify if there are any errors on time. If you find errors, you should correct them on time so that they don’t affect your borrowing capacity.

Usually, lenders go through your credit history to determine your creditworthiness. Anything below 750 will get your loan rejected or expose you to stricter terms. Always ensure you have a strong credit report to improve your chances of qualifying for a good loan.

3.  Making Late Payments

Making late payments on your personal loan is one of the ways you expose yourself to financial stress. Late payments will increase your loan amount and negatively affect your credit score.

To ensure you don’t miss on your personal loan payment date, set automatic billing that allows automated deductions from your checking account. Make sure you have some reminder so that you do not miss the payment dates.

4.  Not Shopping Around

Financial institutions don’t offer the same loan payment period or terms. You need to take your time to shop around for different alternatives and only settle with the best deal.

You must ensure you work with the best financial provider to be happy with your loan. Compare loan terms, monthly fees, and APR among several providers. Ask your provider for a personal loan calculator to help you understand all the fees and the terms involved.

The Bottom Line

Loans don’t have to be intimidating if you take your time and avoid making silly mistakes. A personal loan is supposed to be some form of financial relief and not a burden.

But this will only happen if you take your time to shop for the best loans from the best lenders. Understand everything involved in the loan application process so that you avoid making costly mistakes that can make your loan unbearable.

An individual’s CIBIL score or credit score is like a financial report card that contains a numerical representation of their repayment history. In India, the CIBIL score range is 300 to 900, anything above 700 is considered suitable for loans or credit card approvals. The score of 600 and below is deemed to be Poor, while the score of 800 and above is considered ‘Excellent’. A Credit score is one of the first factors checked by the lenders when they receive a loan application. A CIBIL score is the assessment of an individual’s creditworthiness to repay the loan and financial health which is used as an indicator for providing loans and credit services. Hence it is necessary to do a CIBIL check when applying for a loan.

However, borrowers from the rural sectors can avail a loan with ease as the IT Ministry digital arm, Common Service Centres (CSC) has now partnered with TransUnion CIBIL Limited to provide rural loan borrowers with a CIBIL Score through its network of over 3.61 lakh CSCs across India. This will allow individuals living in rural areas to access loans quickly for their entrepreneurial and personal requirements. A good credit score can also be used by a customer to negotiate for a better interest rate on loan.

What’s a Good Credit Score?

When you apply for a loan, you need to have a good credit score. A good credit score is a reflection of excellent financial history. Before granting a loan, the lenders look through the applicants CIBIL report and compare the credit history of the past three years in the calculation of your credit score. Other factors like your credit utilization ratio, outstanding loans, loan servicing term and percentage of unsecured loans will impact your credit score. Generally, the credit score range is between 300 and 900, wherein score closest to 900 is considered an excellent score to avail loans on a lesser rate of interest from lenders.

High CIBIL Score

An individual’s credit score can range anywhere between 300 and 900; the score usually depends on their credit behavior. Having a score closer to 900 can increase your chances of getting a credit card or easy loan approvals. A good score is quite beneficial for a borrower while applying for a loan, as the lenders give more preference as they are assured with a high score and approve loans to such borrowers.

Low CIBIL Score

When applying for a loan, a borrower with low credit score might find it hard to find lenders that offer a loan, if managed to find one the interest rates that are provided by the lenders tend to be on the higher side. However, the low CIBIL score category is different for every lender. While most banks and lending institutions turn down borrowers with a poor credit score, terming them as less creditworthy and having higher credit risk. Most NBFCs and other financial institutions approve loans for individuals with a low score but will charge higher interest rates on loans.

How to Check CIBIL Score Online?

Banks or financial institutions are not the only ones who can procure their CIBIL report. An individual too can check their CIBIL score online and get the Credit/CIBIL report. Mentioned below are the steps to do a CIBIL checkonline:

Step 1: Click on the ‘Get Your Credit Score’ or ‘Check my CIBIL score’.

Step 2: Fill in the details relating to your PAN and identity proof etc.

Step 3: Click on ‘Proceed to Payment’.

Step 4: Once you’re redirected to the payment gateway, make the payment.

Step 5: Your CIBIL report and score will be sent to your email ID within 24 hours or to your shipping address if you opt for a hard copy.

Check CIBIL Score by PAN Card

You can check CIBIL score by PAN card and some necessary details. The CIBIL score can be checked with the following steps mentioned below.

Step 1: Visit the banks official or NBFCs website, click on “check CIBIL score“.

Step 2: Enter your name as per the PAN Card along with the PAN card number

Step 3: Mention all the required details correctly

Step 4: Enter all the contact details such as your email address, residential address and contact number.

Step 5: Read through to the terms and conditions carefully and click on the submit button.

India is home to diverse cultural festivities and religious carnivals, and none is more enchanting and gripping than the country-wide celebration of Navratri. True to its traditional ethnicity, Navratri is about Goddess Durga’s nine nights’ long battle against a demon. And the tenth day, known as Dussehra or Vijayadashami, celebrates the triumph of good over evil.

This is also the perfect time for you to revisit, introspect, and take control of your finances. You can take inspiration from Navratri to work on self-discipline, and get rid of debts to eventually improve your personal loan eligibility. Learn to save money and stay informed about your finances for consistent growth in your life.

Navratri can teach you basic virtues of life which can help you turn your financial situation around. Here are nice financial lessons that you can learn from the Navratri festival.

Be disciplined about finances

Managing your hard-earned money with caution is crucial. Not only do you save money, but it also helps your financial credibility which increases your chances of getting a personal loan. 

Stop creating new debt

By engaging yourself in a regular budgeting exercise, you will not exceed credit card limits, avoid debts, and pay off your bills on time. All these hugely influence the personal loan interest rates that you will be offered whenever you seek a loan.

Plan and set goals

Start planning your finances for the next 2-5 years. Assess financial prospects and take a personal loan accordingly. In this way, you can buy a house, pay off important debts, fund educational expenses, or get yourself a new car while ensuring that interest rates stay low.

Use extra income with caution

Loans are the most convenient loan instruments for salaried individuals. If you have a regular income and are supposedly due for a hike in the coming days, then make use of the disposable income by accommodating a higher EMI every month. Utilise the personal loan EMI calculator available online to make smart decisions.

Stay focused on your plans

After making plans for your financial future, don’t get distracted otherwise you can lose track of your finances. Follow strict financial discipline so that your creditworthiness stays consistent, and boosts your eligibility.

Diversify your portfolio

While ensuring a regular flow of income, engage yourself in investment planning and building a creative investment portfolio with loans and credit cards. Look for opportunities to invest in the market.

Increase your financial knowledge

Use this time to teach you that you still have so much more to learn. Conduct extensive research and acquire a deeper understanding of the market and your own investments. Review them from time to time.

Take loans responsibly

Banks and financial institutions offer festive loans during Navratri with low-interest rates and processing fees, and you should apply for one if you have immediate big purchases to make. It is, however, advisable to not go overboard with the shopping as the loan needs to be repaid on time to avoid debt traps.

Seek advice from experts

The market can behave unexpectedly and investments can go wrong, so it is in your best interest to seek professional financial advice from experts regularly.