Paying monthly bills, creating a reliable emergency fund, and setting money aside for household-related expenses are a few practices that are a true sign you’ve reached a new stage in your life.
Now that you’re an adult, you need to face reality and provide for yourself. You may be earning a decent amount from your job or business, but as much as you work hard every single day, there will still be times when the amount that you’re earning isn’t enough.
Financial complications arrive when you least expect them. Sudden medical emergencies, accidental damages to your property, or any unforeseen business needs may catch you off-guard and cause unwanted stress. Your day-to-day expenses and bad financial habits will also come into play and make your situation more complicated. Just like the average person, you’ll need to find ways on how to handle your case—and one way to do so is through a loan.
When it comes to loans, getting one from a bank may be the first provider that you think of. Even though this option may give you some flexibility, you’ll need to go through a stringent approval process. If time and your credit score aren’t on your side, you’ll need to find options that are beyond the four corners of a bank.
This is where bits of information can prove invaluable in your times of need. If you’re starting to see signs that you need to make a loan, the first thing that should come to your mind would be to soften its impact on your financial health.
Thanks to developments in the credit industry, you can choose from now more flexible lenders today. To help you find the best choice to fit your needs, check out these new loan alternatives and the reasons why you shouldn’t be scared to use them:
- Online loans
Most online lenders offer products that are similar to bank loans, but they differ in a few critical areas: they have less strict requirements when it comes to your credit history, the time you’ve been in business, and your annual revenue.
Online loans are also easier to apply for and faster in sending out funds. But with all these accessibilities and conveniences, there is one catch: they usually have higher interest rates than bank loans.
- Lines of credit (LOC)
A line of credit is a product that both banks and online lenders offer. However, similar to an installment loan, a business LOC is generally easier to get online compared to applying at a bank.
An LOC is important for a business because it gives you a financial safety net in case you suddenly need cash. As a business owner, you’re given a sum of money you can draw from at any time, and are typically charged with interest based on the amount you borrow.
- Personal loans
A traditional business loan can be tough to get by if you haven’t been in business for a very long time. Even though personal loans come in smaller amounts, you can still borrow a decent sum that can be used to address your needs. This kind of loan is commonly set as regular installment loans, with your eligibility and interest rates determined by your own credit-worthiness.
- Peer-to-peer loans
This relatively new lending model allows you to borrow funds from your peers rather than a single banking institution. Generally speaking, a bank approves your loan to go through online bidding where the funds will come from regular people who want to invest in your business.
As the name suggests, microloans are small loans that are offered at low-interest rates. These are typically given to businesses that are in need of working capital. Historically, banks aren’t interested in lending in such small amounts of money, but alternative lenders are much more open in doing so.
By now, you should know that banks are not the only financial institution out there that can help you get through a monetary crisis. As much as the aforementioned players are relatively new to the industry, there is no reason for you to be skeptical of them. These options are credible and will let you address your personal or business needs with ease. With requirements and payment terms that are less lenient, they’re definitely worth a shot.
At the end of the day, avoiding loans as much as possible should be your long-term solution. It may give you some breathing room for the meantime, but it is not an all-in-one solution. Investing in the right things, adopting good money management practices, and constant monitoring of your spending are all excellent ways you can attain financial freedom.