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Online vs Bank Loans
When you want to take out large loans to finance major expenses, banks loans are one of the solutions that you can look into. Whether you need cash to fund home improvements, pay for college, or take a dream vacation, banks loans have the potential to give you the money that you need as long as you meet the criteria they have set out. A bank loan tends to be for customers who have a good credit score, are looking for larger amounts or for longer periods than an online application.
What Are Bank Loans?
First, let us define what a bank loan is; a bank loan is simply money that you borrow from a bank or credit union. The amount of loan that you can take out and its interest rate will depend largely on your credit rating and your ability to repay the loan. The better your credit rating and present income, the larger the amount you can take out and the lesser the interest rate. Bank loans can also be secured – secured against an asset like a car or home – or unsecured.
There are a number of different bank loan options that are available for borrowers. Understanding the reason for your loan and how much you can afford is essential to determine which type is best suited for you and your present circumstances.
Bank Loans Personal
There are diverse kinds of personal loans that you can take out in banks and credit unions. If you wish to purchase a car, you will need to take out an auto loan. If you intend to take out a loan for other reasons, obtaining a personal line of credit would be the standard route. If you want to unlock your home’s value, you can apply for a line of credit against your home, known as a home equity loan. There are secured types of loans and there are unsecured forms that allow you to take out credit without surrendering any form of collateral.
Common Bank Loan Terms
To have a better grasp of how bank loans work, here are common bank loan terms that you might want to educate yourself with:
- Secured Loans – Secured loans are those that can only be accessed if you have an asset that you can put up as collateral to secure it. Your car, for example, can be the collateral you can use to take out an auto loan. If you miss out on your payments, the bank has the legal authority to take possession of that collateral.
- Unsecured Loans – Unsecured loans are the complete opposite of secured loans in that they do not require any form of collateral. The absence of collateral, however, means higher risk for banks since they won’t have anything to cover their losses once you default on your payments. With that being said, unsecured loans are quite challenging to take out. The qualifications are stringent and nearly impossible for borrowers with poor credit. And if you do qualify, it would normally mean a higher APR.
- Interest Rate – Every loan will always have an interest rate attached to it. It can either be a set or variable interest depending on the kind of loan that you take out and the bank lending you the money.
- Loan Term – Basically refers to the duration or period in which you need to pay back the loan in full.
How to Qualify for a Bank Loan and Bank Loan Calculator
Qualifying for bank loans means that you need to pass certain eligibility criteria. Normally, banks will go over your personal credit history, credit score, the amount of debt you currently owe and your payment history. They will then evaluate your current income and whether or not it would be possible for you to pay the money that you wish to borrow your money. If your credit history is poor, getting qualified might prove difficult. You can use a bank loan calculator to get an idea on the amount of money that you can borrow and the interest rates that will be attached to it.
How to Take Out a Bank Loan
When you apply for a bank loan, you will have to go through an application process that is normally accomplished in person. Depending on the bank, the usual information that you will need to provide in your application form will include social security number, address, employment status and income, and other financial information. The bank will also have to confirm if you are a citizen of the UK. After you have submitted your application, the bank will then look at your personal credit report to determine whether you meet the basic qualifications.
Bank Loan Repayment Process
Most bank loans are installment loans, which means you need to pay a certain amount of the loan every month until you have completely paid back the loan plus its interest rates. The amounts are fixed every month. If you want to ease your loan’s payments, you can pay additional amounts to the principal of the loan which will decrease the amount you will need to pay in interest over the period of the loan. Some banks, however, charge penalties when you pay off the loan early, so be sure that you understand the terms and agreements of your loan to avoid incurring the unnecessary expense.
Quicker and more Accessible Alternatives to Banks Loans
The biggest disadvantage of bank loans is that they are often inaccessible to many people. Their eligibility criteria is pretty strict and people with bad credit are doomed to fail at the start of their application. The process is also relatively slow and would not be ideal if you are in an emergency situation.
Normally, the entire application, approval, and transfer of funds from a bank loan can take about 7 days. In many cases, it can even take a lot longer. If you need money right away in the next few days or if you need quick funding but have bad credit, banks loans may not be the ideal solution for you.
There are alternatives, however, that will provide you with the funding that you need in as early as a day even if you have bad credit or a credit history that is none existent at all and they include:
- Guarantor Loans
- Logbook Loans
- Doorstep Loans
- Payday Loans
What’s more, these options are available from reputable private lenders on the internet like (website name) that will provide you with a comfortable loan that is tailored to your present circumstances without much delay and hassle.