The Best Loan Alternatives

The Best Loan Alternatives



The Best Loan Alternatives
When thinking about borrowing money,​ most people look at​ loans as​ the​ most sensible option .​
Although it​ is​ true that loans are often a​ good option for borrowing money,​ they are also inflexible,​ and if​ you​ are someone who wants to​ pay back your loan early then there can be heavy penalties .​
However,​ there are some alternatives to​ loans if​ you​ want to​ borrow money:
Overdrafts
One of​ the​ cheapest ways of​ borrowing money is​ through the​ use of​ an​ overdraft,​ especially if​ you​ want to​ borrow money on​ a​ short-term basis .​
Your bank can agree an​ amount of​ excess to​ the​ amount you​ currently have in​ your account,​ which you​ can use but will pay interest on​ .​
By authorising an​ overdraft you​ can use this money as​ a​ permanent line of​ credit .​
Some banks even off interest free overdrafts .​
However,​ overdrafts are still not advisable as​ a​ long term means of​ borrowing money,​ and the​ amount of​ credit you​ can get is​ often fairly low .​
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Credit cards
Credit cards are one of​ the​ most common alternatives to​ loans,​ and can provide you​ with a​ good source of​ extra money when needed .​
If you​ can get the​ level of​ credit you​ need and are able to​ pay off the​ bill promptly,​ then you​ will pay little or​ no interest .​
However,​ the​ major problem with credit cards is​ that the​ interest is​ usually higher than a​ loan,​ and there is​ a​ danger of​ getting too many cards .​
If you​ avoid these dangers,​ then using a​ credit card as​ an​ alternative to​ loans can work well.
Mortgages
Mortgages are perhaps the​ best way to​ borrow large sums of​ money over a​ long period of​ time .​
You can add credit to​ your mortgage by borrowing against the​ equity in​ your home and adding that amount to​ your repayments .​
The advantages of​ a​ mortgage are that the​ interest rate is​ low and the​ payments are spread out so the​ payments appear small .​
However,​ because you​ are paying back over a​ long period of​ time,​ the​ interest can still add up,​ and you​ will not pay the​ amount back for a​ long time .​
Hire purchase
Hire purchase is​ useful if​ you​ are borrowing money to​ buy a​ car or​ high value electrical goods .​
Car dealers often offer this method of​ borrowing money during the​ sale .​
In hire purchase,​ you​ pay a​ deposit and then pay monthly payments to​ the​ provider .​
When these payments are finished,​ then the​ item belongs to​ you.
This is​ a​ good method for buying a​ car as​ the​ interest is​ often lower than a​ normal loan,​ and it​ is​ made easy by the​ fact that the​ credit is​ provided by the​ seller .​
However,​ it​ is​ called ‘hire’ purchase because until you​ finish all of​ the​ payments,​ you​ do not own the​ item,​ and if​ you​ miss payment the​ item can be repossessed.
Which is​ best?
Deciding if​ one of​ these loan alternatives is​ right for you​ can be tricky,​ but to​ help you​ decide you​ should work out what it​ is​ you​ want to​ borrow money for,​ how long you​ want to​ be paying back the​ money,​ and your overall financial situation .​
If you​ look at​ all the​ options,​ then you​ will find the​ best method of​ credit for your needs.




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