Loans for Starting Up a Business

There are various options to get a loan for starting a business. This article gives a brief idea about the different types of loans for starting a new venture.

 

Having a killer business idea is not enough to start a business. 'Finance' is the key factor that is required to start any kind of business - a small business unit or a medium size one. Take time to pen down the various sources/options of loans for financing your venture. This would give you a vague idea regarding whom to approach for a business loan. You should also consider how and when you plan to repay your business loan.

There are certain things that you need to take into consideration while applying for a business start up loan. First and the foremost thing is to check your credit report. If you have a bad credit history, repair your credit before applying for a business loan. A bank or a financial institution will lend you a loan at a higher rate of interest if your credit rating is poor. Instead of paying a higher rate of interest it is wise to improve your credit score before approaching a financial institution.

Loans for Starting Up a Business

You can finance your new business by using some amount of money from your savings. Another source of loan for starting a business is to borrow from close family and friends. If they have faith in your business plan, they would be ready to finance your business. Else you can apply for a business start up loan in any of the traditional financial institutions, for instance a local bank or a Credit Union.

Small Business Administration: Small Business Administration or SBA is the single largest organization in the United States to provide assistance to any new venture. SBA assists a new business by granting loan at a reasonable rate of interest. Whatever may be the size of the business, the applicant must contribute at least 10% of the total amount of his loan as down payment. The loan amount can be used for various business purposes such as to buy machinery, furniture and could also be used as working capital. SBA business loans are long-term loans ranging from 7 to 25 years and the maximum loan amount that is around $2 million. SBA grants small business loan for anybody who wants to start a business venture.

Secured Loan: You can obtain a loan for starting a business, if you are ready to provide a collateral. A collateral is an asset such as your car, home or property, which a borrower pledges with the bank to raise capital to start a business. A secured loan is easy to acquire at a reasonable rate of interest. However, keep in mind that if you default on the monthly payment the financial institution or the bank has the right to foreclose your property.

Bad Credit Business Loan: Acquiring a business loan may not be easy if you have a blemished credit history. No bank would be willing to give you a loan if you have a credit score less than 650. A private financial institution usually grants bad credit business loan but at a higher rate of interest. Before zeroing in on a particular financial institution, check out the online and offline bad credit business loans. This would give you a vague idea regarding the rate of interest offered by various financial institutions.

Business Start Up Loans for Women: Nowadays, women are career-oriented because they are educated. Many of them are interested in starting their own business ventures. They can avail business start up loans at a reasonable rate of interest through SBA programs. Most banks and Credit Unions offer loans under the SBA program. If a woman is interested in starting a business, she should first approach a nearby bank or the local Credit Union to get information.

To summarize, there are many factors such as your credit rating that you need to take into account before approaching a financial institution for a loan. Given above are some of the loan options for starting a business. Choose a loan option that is best for you. If you are not sure about how to go about the process of acquiring a loan for starting a venture, do not hesitate to approach a reputed financial advisor. After understanding your business plan, he would be able to guide and also advise you on the type of loan that is best suited for your venture.

By Maya Pillai

 

Personal Loans for People with Bad Credit History

There are some banks and lenders that provide personal loans for people with bad credit history, even though getting these loans is quite difficult. It helps if you have some personal asset that can be secured as collateral.

Finding personal loans for people with bad credit history is not an easy task by any means, and this is something that can be quite distressing for some people. Credit history is something that is built up over time, and it reflects the general financial management capabilities and the credit history of an individual. When a bank or a financial institution gives a person a personal loan, it needs to know the chances of that individual repaying that loan at the right time.

Failure to repay these loans by the individual would mean that the bank has to sustain a loss, and this is something that the bank needs to protect itself from. Hence, they carefully analyze the credit history and the credit report of the individual to see what their past performance has been like, and what the chances are of him/her repaying the loan on time.

Bad credit history cannot be erased, nor can it be reversed, and this is a major hindrance for getting personal loans. It is for this reason that personal loans for people with bad credit history is very hard to come by.

Personal Loans for Someone with Bad Credit History

All this does not mean that it is not possible to get personal loans at all, if you do not have a good credit rating. There are still some options available to you, but the only difficult part is finding someone willing to take that risk. It is important to not get discouraged by rejection, and to keep trying to get a personal loan nevertheless. There are 2 options available to people with bad credit history in such a scenario.

One of the most popular solutions to this problem are secured loans. This means that the individual gets a personal loan, by securing a personal asset as collateral. Banks are always willing to consider this option, because it means that even if the individual defaults on his payment, the bank can sell the asset and recover some proportion of the loan amount. Of course, the individual is notified of this sale before it occurs, and he/she is given sufficient time to repay the amount. The bank will sell the asset only if it is sure that the amount if not going to be recovered in any other way. The most common assets for personal loans for people with very bad credit history are houses, property, cars and other valuable items like family heirlooms.

The other option to look out for are unsecured loans. In this case, there is no collateral asset, so the risk incurred by the lender is much higher. These loans are the most difficult to get, because the lender stands to lose the loan amount entirely if the individual cannot pay, but there are some specialized banks that do offer these kinds of loans.

Admittedly, the interest rates on these loans is very high, and this reflects the high risk associated with them. Banks and financial institutions that offer such loans are known as sub-prime lenders. Even though this option exists, it is very difficult to get such bad credit loans, especially after the well documented sub-prime crisis hit the American economy last year. This crisis was a direct result of too many unsecured loans doing the rounds in the market.

Personal loans for people with bad credit history is difficult, but not impossible. After all, there are many individuals who have to face this problem from time to time, and the Government has made it possible for them to receive loans. People who undergo bankruptcy have to start their financial rehabilitation and credit repair somewhere, but this is something that takes time. The important thing is to not lose hope, and to have faith that you will pull through these dire circumstances.

 By Rahul Thadani

Auto Loans: What is an Auto Title Loan

An Auto Title Loan is a short term loan that is secured by the title of your car. Here is a discussion about it as well as some Auto Title Loan tips.

 An Auto Title Loan is a loan taken on short term, generally not more than 30 days. The loan is secured by using the title of your car. This basically implies that in the event of you not repaying the loan, the lender has the right to take your vehicle and sell it in order to recover the loan money. Auto Title Loan lenders will usually provide the loan only if there is nothing else owed by you on the car.

Here are some Auto Title Loan tips:

How do Auto Title Loan Lenders function? - Auto Title Loan lenders usually focus their attention on elderly people, military personnel, individuals with low-income, and people who have bad credit. Their main method of making money is by charging high rates of interest and of course by repossessing the consumers’ cars when they are unable to pay the loans off.

Why do you need to beware of an Auto Title Loan? - When an individual is undergoing monetary problems, a short-term loan like an Auto Title Loan may seem to be an attractive option, particularly for people who have credit problems. But, and Auto Title Loan is a short term solution and it has the potential of having devastating effects. It can mean you having to pay excessively high rates of interest and enormous amounts of money or end up losing your car.

What is the maximum amount of money that an Auto Title Loan lender can loan you? - Auto Title Loan lenders can make loans only according to a fair assessment of the market value of your car, which common industry guide appraisals determine. Usually Auto Title Loans range from $601 to $2,500.

So, exactly how high are the interest rates of an Auto Title Loan? - The loan is made out showing the interest rates that apply for a short period of time. For instance, a 25 percent interest rate will be shown by the loan for a single month. However, if this rate is calculated over a year, it actually comes to 300 percent. Auto Title Loan lenders generally give a loan for a period of 30 days or less. Hence, at the month’s end, the lender will agree to take the interest payment and let the debt roll over to the next month. Therefore, if you take a loan of $600, the interest would amount to about $150, which means you owe a total of $750. So, if you pay only $150 at the end of the month, it will mean that the amount you owe the next month comes to $750.

What if you are unable to pay off the Auto Title Loan in the stipulated time? - If you are unable to pay the loan off, it will just be rolled over to the next month. Often, the borrower cannot pay off the full amount of the loan, so the interest begins building up once again at the high rate. This is known as ‘flipping’ or ‘rolling over’ the loan.

Why are Auto Title Loan lenders called 601 lenders? - The high rates of interest that Auto Title Loan lenders charge can only be done on loans the amount to more than $600. Loans that are taken lower than this amount have interest rates that are limited, which means that the lenders would not be able to make as much money. This is the reason Auto Title Loan lenders are often called 601 lenders.

Is there any limit to the number of times an Auto Title Loan can be ‘rolled over’? - According to the law, the Auto title Loan can’t be rolled over more than six times. In case it is rolled over as many times as that, it will mean that the amount of interest to be paid will be very high.

What happens when the Auto Title Loan is not paid off? - Except in the case of a fraud, all the Auto Title Loan lender can do take your car away from you and sell it. In other words he/she cannot sue you to make you repay the loan, but have the right to repossess your car. If this is about to happen the best course of action would be to call a lawyer.

Can an Auto Title Loan lender give an initial low interest rate, and then increase it in later renewals? - According to the law, the Auto Title Loan lender cannot offer or advertise a lower rate of interest for the initial period if in the later renewals the rate of interest increases.

Can you get out of the Auto Title Loan deal after signing the papers? - You certainly have the right to rescind or cancel or the deal, as long as you do it within a single business day. You have to give back the borrowed amount, without interest, before the next business day closes after taking the loan. For instance, you take an Auto Title Loan on Monday, if you decide to cancel, you have to return all the money, without interest, by the end of Tuesday.

By Rita Putatunda