Category: credit management
There are times where emergency spending happens. These emergency spending may be in the form of medication, check-ups, minor car or home repairs, or other small purchases that address our family’s needs. These small spending may be addressed by getting a small amount of loan to cover for the shortage of income versus the expenses.
The minimal amount loan that can be availed of is a payday loan. But what can these payday loans offer and what should a borrower watch out for? Here are a few advantages and disadvantages that can help decide if the payday loan is indeed the best option.
Advantages of a Payday Loan
- Payday loans are minimal and easy to avail of. Being a very lucrative business, a lot of businesses engage in payday lending. Payday lenders only require documents that are most probably at hand and does not require any special document to be provided.
- Credit score is not reviewed when availing of a payday loan. When applying for a payday loan in Singapore, the lender does not require that your credit score be reviewed. Submitting and validation of the information that you shared is already good enough for granting the loan as soon as everything checks out well.
- Payday Loans are Fast Options. Soon as you apply for a payday loan, it can be approved within the time frame of your application. As long as you have complete documentation and requirements, an approval will never be far from being received.
Disadvantages of a Payday Loan
- Short period for collection. Most loans are available with a minimum term of 12 months. Unlike any other loan, the payday loan is required to be paid within 20 days or the next payday whichever is shorter.
- Continues to affect credit scoring. Although your lender may not require to check your credit score, delinquent payments will push these lenders to resort to collection agencies who report these non-payments that affect your credit score.
Interest rates are very high. Payday loans are one of the kind of loans that require payment of a very high interest rate. Despite regulations that are being placed to ensure consumer protection, interest rates are very high for these types of loan. The annual percentage rate can soar up to 400%.
Mortgages are debt instruments that offer repayment basis where the borrower pays for the price of the property plus interest. A mortgage usually has a term of 25 to 30 years wherein after the term period, the mortgage debt has been fully paid.
As mortgages help individual purchase property at an affordable price, here are some advantages and disadvantages of getting a mortgage:
- Mortgage Makes Property Purchase Affordable
As mentioned above, one of the best way to make a real property affordable for someone to purchase is through a mortgage. The licensed money lender spreads out the payment of the property throughout several years where monthly amortizations include interest payments.
- Cost Effective Borrowing
Interest rates on a mortgage tends to be a lot lower than interest rates applied to other loans. The reason for this is that the lender puts a lien over the house which allows the lender to take back the house and sell it to another person.
- Mortgages Don’t Deplete Savings
For individuals who have enough money can still purchase through a mortgage and put the remaining amount in an investment vehicle that can help them earn the amortization payments.
- Total Cost is Higher
The total accumulated amortizations will always amount to way more than the price of the property. Despite of low interest rates, the long period of paying amortization accumulates a large sum of interest yield that is often way more than expected.
- Fees and Charges
Like any other loan, mortgages incur penalty fees, finance charges, and other payments required based on the conditions and terms. It’s not always that the culprit in accumulating high total costs is due to interest yield. Sometimes fees and charges play a big role in the total amount being paid.
By understanding the points that were given above, you understand and identify that getting a mortgage is worth it.
If you are a business owner, sooner or later you will need to make a business loan for whatever purpose you may identify. There are instances that you hear how good it is to have made a business loan as it helped them pull the business up from the brink of failure. On other hand you may here others who may disagree that business loan can cause you more problems.
In deciding if you really need a business loan, here are a few advantages and disadvantages that can help you.
- Build Your Capital. Whether you are an existing business establishment or a new business starting its operations, a business loan is a good way to build your own capital without needing investors who will have ownership over the business.
- Grow Your Business. With proper planning and execution, business loan can greatly help you in growing your business. It can address the expenditures for increasing your inventory or cover the expenses of setting up a new shop. A business loan can cover these factors that will ensure your business to move ahead.
- Consolidating Loan. A business loan can be used for consolidating all the loans an existing business may have. If the business requires simpler monitoring of all its debts, it is a good strategy to consolidate your loan under a single one. It will allow you to have one due date to monitor, one amortization payment to track, and even have one lender to talk to.
- Limited Amount. Unlike sourcing your funds from investors, the amount you can borrow can only amount to as much as you are qualified for. You have to look for other ways to find additional money if the loan that has been granted to you is the maximum qualified amount.
Long Term Obligation. Like with any other loan, having a business loan will mean commitment to a long-term obligation. You need to ensure that you have plans on how to support this long term obligation which the business will need to liquidate.
Having a credit card is neither good or bad. There will be some people who will tell you that credit card is bad especially if you are not rich. Some people on the other hand would recommend it and even encourage you to get one regardless if you are rich or poor. These are usually based on how people have experienced about having a credit card in the first place. Here are some advantages and disadvantages you can checkout to know where you can put yourself in if in case you consider of getting one.
- Yes, this is actually the best advantage a credit card can offer. With the growing technology, you can now pay for services and buy goods through an online store. Having a credit card allows you to pay an online merchant without requiring any cash to be mailed or transferred.
- Credit cards offer the most efficient mode of payment as it the holder does not need to bring a big amount of cash when making large purchases. A downpayment for a car, equipment, or even property is available through credit cards. The holder no longer needs to visit a bank to withdraw or have the bank create a manager’s check.
- With all the competition going on between card issuers, they are willingly providing promotional offers and perks for the holder. They also give rebates and discounts that can be taken advantage by the holder.
- One disadvantage of having a credit card is spending beyond your means. Having access to payment where cash is not available can be taken advantage of. Sometimes we start believing that it is okay to spend even without cash and we can pay for it at some point. Later on, we find ourselves with an accumulated debt that is actually hard to manage.
Interest. Like any other loan, using your card accumulates interest. If you pay your credit card full every due date, you still accumulate interest for the days that the amount remains outstanding. Interest rates are the way for a credit card company to collect from its holders the payment for using their cash.