5 Actionable Steps To Borrow Money When In Need
Businesses in the Philippines are bouncing back after the effects of the COVID-19 pandemic.
What does that mean? Opportunities to work are becoming more available again.
While anyone can run a business, it can be difficult to have working capital. Fortunately, there are loans available for businesses. It can give you additional assistance when you lack funds or want to overcome financial problems.
People borrow money or, in formal terms, apply for a loan for different reasons. It’s spent most of the time on urgent expenses or an endeavor, both small or big.
Nowadays, people can borrow various types of loans and different purposes they can spend them on.
You need these funds to run the business. Once you give the needed information to the lending company, it can be approved.
If you are still unsure how a loan works, here is the process of getting one.
1. Choose between secured and unsecured loans
Loans, in general, come in two forms: secured and unsecured. Business owners have the option to select either.
For instance, a secured loan requires collateral, while an unsecured one does not. Lenders can use the collateral to protect the working capital if the finances are not going well.
But if you are low on funds to pay your employee’s salaries, you can opt for a payday loan.
It does not require collateral, and the lending company can give it immediately. Be sure to find which loan is fit for your business.
2. Go through your credit history
All lenders will go through your credit history. If you have good credit, you are a responsible borrower.
It is the basis of how you handle your finances.
On the other hand, when you have bad credit, you may not be able to receive ideal terms.
If you still want to get approved, you must be more strict about paying off your loans.
3. Pay the within the specified time
Loans have their respective repayment periods. For example, a small business loan can last six months or up to 1.5 years.
While you pay for your loan, it should not go beyond the loan term.
Why? It may be less likely for you to get another loan approved. You can pay off your loan monthly or semi-monthly. It is up to the business owner how the loan will be paid.
4. Take note of additional fees
When processing your loan, you may encounter additional fees. It can be the documentary stamp, disbursements, or processing fees.
These services are allotted to lenders to compensate for the possible risks associated with the loan. While it may mean additional pocket money, they want to ensure it is safe to give the loan.
5. Know how much money you can borrow
You need to know the exact amount of money you will borrow. For example, a small business loan in the Philippines lets you borrow as much as PHP50,000.00 up to PHP200,000.00.
Anything higher than indicated is not possible. Unless you want to find other services, you can borrow higher amounts but expect that you will need to pay higher interest.
With that in mind, here are some loans you can borrow when you need it.
1. Personal loan
A personal loan is commonly an unsecured loan, which means it doesn’t need collateral to avail it. Typically, you can secure it via an online lender, a bank, or a credit union.
In addition, since it’s an unsecured loan, lenders often see a personal loan as a riskier financial transaction and will likely charge loaners higher rates.
Approval for a personal loan typically depends on your credit score and income. It’s best for borrowing money online, from banks, or credit unions if you need to access funds quickly.
Fixed-rate loans with consistent monthly payments are also available when applying for personal loans.
2. Credit card or cash advance
Using a credit card is also classified as a money loan. This is because you are borrowing money from a credit card company or a bank to purchase things when you don’t have cash on hand.
There are also multiple credible options for credit cards to choose from.
A cash advance works similarly to a credit card, but you’re withdrawing cash instead of paying for a purchase. However, a credit card cash advance comes with fees when you withdraw money and monthly interest.
So, you should pay its monthly balance if you choose to borrow money through these methods to avoid interest charges from adding up.
Read Also: 5 Steps To Get Payday Loan Online
3. Home equity loan
You can qualify for a home equity loan when you’ve built up enough home equity.
Home equity is the difference between your house’s worth and how much you owe on your mortgage and other debt related to your house.
Your home equity increases as you pay down your mortgage or your house’s value increases.
Applying for a home equity loan means you’re borrowing money from your home equity and using it as collateral. It’s best for people who know exactly how much money to borrow and those who need to borrow all the money.
4. Retirement loan
Employees with a retirement plan through their employer may loan money from it.
Plan sponsors might offer the opportunity to take out a loan against part of your vested balance.
It’s a convenient way to loan money because it doesn’t affect your credit, and no credit check is required to apply for it since you’re technically loaning from the money you’re set to receive when you retire.
Read Also: 80 Ways To Save Money!
Loans can give you financial protection when your business is in a pinch. But you have to be responsible for paying back the loan. Once you do, you will build your credit history on good credit. Then, in the long run, you get better offerings for your business.
Any qualified individual can borrow money from a bank or a financial solutions company. It makes a world of difference that loans are much more accessible these days, especially for those who urgently need money.
Having several options is a huge benefit for everyone in dire financial need.
Having several ways to spend borrowed money is also quite helpful. While loans are more accessible now, knowing where to spend them will help people improve in managing their finances.
Borrowing money when needed is now more accessible. You should take advantage of your options available if you need financial help. Ensure you also spend your loaned money wisely and repay them according to the loaner’s terms.