Why You Need to Be Careful with Cash Advances

 

There are times when we are brought into a situation where a credit card is not welcome and the merchant only accepts cash. These may become a problem when you don’t have enough cash and the purchase you need to make would be for a basic need like food or a necessary service such as a cab ride. When you are placed in this situation, there may not be any other option but to get cash advances from your credit card.

Cash advances are loans being placed within the available credit limit of your card. In other words, instead of buying a product or service with your credit limit, you are taking in cash that would be used at your disposal.

Why Cash Advances are Costly

When you decide to take on a cash advance, always remember that the interest fees associated with these transactions are much higher than charging the purchase to your card. Interest fees are applied on the day you take the cash advance and can really hurt if it takes you a long time to pay for it. On top of these interest fees are cash advance fees that a credit card issuer charges in addition to ATM fees. This means that a big chunk of your outstanding balance from the cash advance is associated with interest and charges.

Avoiding Cash Advances

As much as possible, cash advances need to be avoided especially when the amount you are planning to take is quite big. Better check on getting a personal loan instead and may yield a much lower amount of interest and finance charges. Because of the high interest yield from these cash advances, it is possible to be paying for a big amount that is only associated to the fees and interest payments. It is important to note that cash advances should only be availed as a last resort.

What You Need to Check When Getting a Personal Loan

 

Personal loans are one of the types of cash loan that you can borrow from a bank or a financial institution. When a personal loan is mentioned, it is often referred to as an unsecured loan where a collateral is not required. Proceeds of personal loan can be used at the discretion of the borrower and no specific use is required by the lender. It can be used for household repairs, large purchases, or even debt consolidation that borrower may want to apply it to.

When getting a personal loan, they are often harder to get an offer a higher interest rate because they are unsecured loans. When getting a personal loan, here are a few things you may need to check before availing for one:

  1. Know Your Purpose for the Loan

Even before you apply for the loan, you need to ensure that you have identified the need for the loan. A personal loan should have a purpose and not for the reason that you are short of cash. It needs to be a reason that is specific and entails a goal to accomplish. Identifying your reason will allow you to know the type of personal loan package that you need to avail of and the amount that will fit for your purpose.

  1. Availability of Income

You will need to identify the availability of your income during the loan period. Your income must be sufficient to cover your amortization payments and still have enough to pay for your living expenses. It is also necessary to plan regarding your loan. Knowing where to source your income for the amortization payments allow you to manage your loan during its term.

  1. Identifying the Term

When availing of a personal loan, as part of your planning you will need to identify the length of the term you will avail on repaying your loan. A longer payment period may mean lower amortizations but higher interest fees paid. A shorter payment period will give you higher amortizations but lower interest fees paid. Knowing how long and how much you are willing to pay will help managing your loan well.

What You Need When Getting a Business Loan

 

Business loans have been solutions that entrepreneurs use when they need funding for a start-up business or even increasing capital of an existing one. Getting a business loan in Singapore may prove to be fruitful so long as it is availed with a goal in mind and a proper plan in managing the loan is in place.

If you are one of those aspiring entrepreneurs who would like to start up a small business, here are two necessary supporting requirements you may need to submit to your prospective lender:

  1. A Good Business Plan

If you would be a licensed money lender granting business loans to your clients, you would want to make sure that the money you would be lending would generate enough income so that the client or borrower can pay you back. One way to ensure that the business has a potential to earn, reviewing a good business plan can help you validate this.

As a borrower, it is important that you should be able to provide a good and strong business plan to convince your lender that he is investing his money well with you. If your business plan isn’t convincing the lender that the business can earn, most probably you would need to look for that much needed cash elsewhere.

  1. Profit and Loss Statements

A profit and loss statement is a good way to support your business plan. If you are an existing business, this document would be or should be readily available to you. If you are a start up business, a forecasted Profit and Loss Statements should be helpful enough to support the business plan. This will help your lender understand and see that you have anticipated all angles possible losses that may occur during the start of your operations.

It is very important that you show reliable and reasonable profit and loss statements. If you put too much icing and blow up your numbers just to make it look good, your lenders will see this and you know where your business loan application will end up. You need to be realistic with your numbers and understand that it will be the basis for your approved loan.

What You Need When Getting a Mortgage

 

Mortgages are one of the best ways to acquire a property. Not everyone may have the full cash value of a property that is for sale. Getting a mortgage to support the purchase is the best way work around this problem. Mortgages help the buyer pay for the purchase price where the lender receives payment with interest for the borrowed money. In addition, the title of the property is held on to by the lender and puts a lien over the property. The reason behind this is that in cases where the borrower defaults in payments, the lender may foreclose the property and sell the house to collect the outstanding balance from the proceeds.

When getting a mortgage for the purchase of a property, here are some of the things you will need to keep in mind:

  1. Mortgages are loans

A mortgage is a loan. Like any other loan, an interest payment is collected for the use of borrowed money. On top of interest payments, mortgages also apply charges such as late payment fees and other finance charges. Also, like any other loan, any default made by the borrower gives the lender the authority to sell the property to collect and apply over the outstanding balance.

  1. Long Term Amortizations

Because of the large amount that is being granted as a loan, mortgages have long term amortization periods ranging from 20, 25, or even up to 30 years. The long-term period allows the borrower to have affordable amortizations due to the spreading of the loan through a long period of time.

  1. Requires Planning

Since mortgage involves a large sum and a long period to commit to, getting a mortgage requires good planning and management of the loan. Being committed to an obligation for 20 years or more is a very long period. It requires good management of the debt to avoid any concern that may end up in getting buried in debt.

When Should You Avoid Personal Loans

 

Like any other kind of loans, a personal loan takes a lot of responsibility to instill discipline in managing your them. It is necessary for a borrower to be able to manage finances especially a big loan amount. There should be proper planning when availing a personal loan.

Personal loans can help address your need for car/household repairs, large purchases, or even consolidating your existing loans. A lender does not require the borrower a specific spending for the proceeds from this loan unlike mortgages and auto loan. But with every loan comes the necessity of good planning. Here are a few points that can help you identify if a personal loan is not for you:

  • Identifying the Need

Knowing which need or goal needs to be addressed is very important when availing of a personal loan. It is a must that a goal or need has been specifically identified when making a personal loan. Without a goal or need, a personal loan would only cause you to spend more for something you don’t really need. If a personal loan has been availed without a goal or need, the money will be spent on other things that will not bring you benefit financially.

  • Identifying the Source of Income

It is quite important that you know which income your payment will come from. Knowing where to outsource your payment is necessary as this will help you find security that your amortizations would be paid upon due. Your income should also be sufficient to cover for the loan amortizations and your living expenses. Never take on a loan where you don’t have a source of income to pay of your debt.

  • Identifying the Term

Know how long you are willing to pay off your loan. Understanding this will help you create savings or lower amortization payments. It is necessary to identify your priority which will help you maximize your goal for availing a personal loan.