Best loan options for first-time borrowers
First-time borrowers are expected to face different challenges when acquiring a loan. For example, you will still have to make the lender believe that you can repay the loan without any difficulty despite your credit history or other financial references. Additionally, the stigma of rejection is a common problem most first-time borrowers face.
This is the reason why you should choose the loan option that seems best suited to your situation. If you are a first-time borrower, the best thing to do is explore all of the options available. To make it easier for you, here are the best personal loan options you should consider:
Secured Personal Loan
A secured personal loan is a loan backed by collateral. Lenders such as CreditNinja require this collateral to protect the loan you take out, especially if you have a bad credit rating. Providing loans to people with bad credit is a huge risk for lenders. They therefore require guarantees to reduce this risk.
If you do not repay the loan, the lender has the right to repossess the collateral in payment of the money you owe them. Assets that can be used as collateral include various valuables, such as a house, car, or jewelry.
A secured loan is an installment loan, which means you can pay it back over a longer period of time. Whether you prefer a longer or shorter loan term, the best option is always to talk to your lender. See if they can customize a schedule to suit your ability.
Payday loan or cash advance
Unlike an installment loan, a payday loan or cash advance is a short-term loan that requires the borrower to repay the debt on their next payday. The principal amount of a payday loan or cash advance is usually a percentage of the amount on your next paycheck.
This type of loan has a higher rate of interest alongside the short term repayment plan. However, if you are a first-time borrower or have a bad credit rating, this would be the best option for a quick cash advance.
Payday loans can only be acquired from direct lenders or from payday lenders themselves. Banks and other traditional lenders do not offer this loan option to their customers. Therefore, if you are considering this loan, you had better check with your lender first to see if the option is available.
A third party supports a secured loan, called a guarantor. The guarantor will be responsible for repaying the loan if the primary borrower defaults on the loan. The warranty can be limited or unlimited.
A limited guarantee will only allow the guarantor to pay off part of the loan, while an unlimited guarantee will require the guarantor to pay the full amount of the loan. There are three types of secured loans that you should know about.
The first is the personal guarantee, that is, an individual will be the guarantor and will be held responsible for the loan in the event of default. The second secured loan is the bank guarantee, which means that a commercial bank will be the guarantor of the loan and will be responsible for repaying the loan in the event of default by the borrower.
The third type of secured loan is a financial guarantee, which is similar to a bank guarantee. Like an insurance company, a financial institution is obligated to pay off the loan if the primary borrower does not.
Cash advance by credit card
If you already have a credit card, it means you already have an active credit history. A credit card cash advance is a short-term loan offered by your credit card provider. Here you take out a cash advance on your line of credit.
This is why credit cards are preferred by many because they not only allow you to buy things without cash, but also allow you to get cash with it. In addition, there are several ways to acquire money on your credit card line of credit.
The most popular and easiest way is through an ATM. You will need to go to the nearest ATM and use your credit card the same way you withdraw money with a debit card. Another way to get a cash advance is to go to a bank and request a cash advance on your credit card.
You can also get a cash advance through a payday check. For example, your credit card may come with a convenience check. This allows you to issue a check against your credit card and choose to cash it or deposit it directly into your bank account.
While there are a handful of loan options available for first-time borrowers or people with bad credit, it’s always best to take the time to build your credit score. A good credit score will give you even more and better options.
Always keep in mind that every loan you apply for will affect your credit score, especially if the application is rejected. Each claim you submit deducts five points from your credit score. So it pays to always choose the best loan option and only apply if you are sure you qualify for the loan.