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- Category: Finance
Understanding what is a loan has remained challenging for some people, especially those planning to apply for credits sooner. Though various loan types come in handy to solve existing financial problems, familiarizing with different loan types is vital. With several lenders out there, working with the best in the industry guarantees exciting benefits of loans. Before applying for your first loan, learning about it, including different types available, is crucial.
Getting a definitive answer to what is a loan can be a hassle hence the need to learn the basics that include definition, types, and advantages. Most people have borrowed loans, including debts you request from your friend. However, financial institutions, including Mwananchi Credit Limited, offer various loans to the borrower. This guide helps you explore what loans are and how to choose the right type.
What is a loan?
A loan is any form of money granted to another individual or company with an agreement to repay it in the future. Lenders can include interests to the primary amount borrowed, which are additional charges of the loan. Based on the lender, the mode of payment varies with financial institutions having a repayment plan. Some people search ‘loan definition business’ to get a broader understanding of loans.
Loans can either be secured or unsecured. Secure loans involve borrowing a loan against collaterals such as a house, vehicle, or title deed. If a borrower pulls out from repaying the loan, the lender takes ownership of the pledged asset. On the other hand, unsecured loans are free against any security, and in case a borrower defaults, the lender has nothing to possess. Therefore, the article provides incredible insights about what is a loan and all things you should know in 2020 and beyond!
What are 4 types of loans?
Most lenders offer secure personal loans, which are borrowed and used in whichever way a borrower prefers. Though available at high rates, they are essential if you need additional funds to resolve pending financial problems.
An auto loan is a type of loan granted to applicants to finance the purchase of vehicles. If a borrower defaults, the lender loses the car. Interest rates are often lower and accompany a flexible repayment period.
Cash advance loans
One of the crucial terms you will interact with when digging in the question, what is a loan. Whether you have an invoice or cheque yet to provide ready cash, Mwananchi Credit Limited can grant loans against the outstanding invoice or cheque. It is among the common types of consumer loans that eliminates the wait of either clearance invoices or cheque maturity.
Mwananchi Credit offers secured loans provided against title deeds or logbook. If you are an individual, small or medium-sized business, you can apply for secured loans against logbooks, house, or title deed. These are often long-term loans with flexible repayment plans.
What are the advantages of loans?
Facilitates growth and expansion
If you lack funds to grow your business, applying for a loan can help you grow and expand significantly. Notably, you get vital funds that enable you to develop a particular section which facilitates expansion and growth.
Lenders rarely implement rules on the usage of funds provided, giving you the freedom to plan your finances. Besides, the reimbursement is adaptable, which provides you with room to repay the loan while benefiting from it.
Lower interest rates
When you borrow your loan from Mwananchi Credit Limited, you are guaranteed lower interest rates beneficial to borrowers. Intrinsically, you get to borrow different rates at competitive rates crucial for both first-time and regular borrowers.
What is loan restructuring?
It is where a borrower renegotiating the debt repayment process to reduce rates or monthly repayment amounts when faced with cash flow problems.
What is loan servicing?
It involves the lender collecting the principal amount, interest, and additional charges from a borrower when the reimbursements are overdue.
What is a loan refinance?
Loan refinancing is taking a new loan with the motive of repaying all outstanding loans and later repaying it at a lower rate or reduced amount.
What is loan underwriting?
It is the process of assessing the risks of granting loans to borrowers, especially understanding repayment capabilities.
People need to know what is a loan as some factors may drive them to apply for specific loans. Mwananchi Credit Limited offers various loan types for applicants; hence learning different types allows you to understand which loan to apply. Get your first loans with Mwananchi credit.