Whenever a bank allows someone to borrow money from them, they have the law on their side if the person tries to get out of repaying the loan. However, sometimes it’s impossible to get the money back, for example, if the borrower goes bankrupt or leaves the country on purpose to skip out on repaying the money. For this reason, banks conduct a thorough vetting process on anybody who applies for a loan, often refusing a large amount of applicants.
However, even for someone with an excellent credit score, the process of getting a loan from a bank can take quite a long time and require filling out many forms. But in the case of unexpected expenses like car trouble or dental emergencies, for example, it’s just not possible to wait. That’s why there are a number of loan organizations that can provide cash to people in financially dire stairs, on the same day.
Various sites, like Postandcourier.com, have reviewed the best fast cash loan providers, making it easy for consumers to compare the different options and learn more about obtaining loans quickly. But there are plenty of other ways to compare the best same day loans available and decide which one is best in any given case. The more carefully you research your options, the more likely you are to get the best deal.
Credit Ratings and the Five Cs
Over the years, as lenders tried to decide whether to lend money to prospective borrowers, they narrowed down the most relevant factors to what is now referred to as the Five Cs of credit: Character, Capacity, Capital, Collateral and Conditions. Borrowers who have good scores in these five key areas are likely to pay back all the money they owe within the stipulated time period.
Knowing about the character of a prospective borrower gives the lender a good idea of whether this borrower will do absolutely everything possible to ensure they repay the money owed. Lenders must consider whether a borrower has taken out loans previously. If so, have they repaid them on time? Does the person normally keep a consistent positive balance in their account, or do they often overdraw?
To calculate whether a borrower has the capacity to repay the loan, simply determine the person’s monthly income vs. monthly expenses. Even if somebody has the best intentions of paying back their loan on time, it’s not realistic to try and pay back a large loan amount with only a small income.
Sometimes, even if a person doesn’t have much of a monthly income, they will still be able to secure loans. This is because they have capital – in other words, a large sum of money in the bank or investments. Having plenty of capital is especially relevant to someone’s capacity to repay a loan if that capital is going to be invested, thus generating potentially even more income or interest.
Somebody who doesn’t have much income or much capital can also sometimes successfully apply for a loan – if the person has plenty of collateral. Collateral is any valuable assets the borrower owns that the lender could repossess if the borrower defaults on loan repayment. Buyers of motor vehicles typically enter into hire-purchase agreements, where the car can be repossessed by the bank if the buyer defaults on too many payments.
Lenders also think about the broader context of the borrower when deciding whether to approve loans. For example, has this borrower only recently joined his or her company, or rather, been with the company for many years? That might affect how likely the person is to be made redundant if the company needs to cut its costs. Whether or not the industry the borrower is involved in is doing well also makes a difference. For example, as AI technologies start to play a bigger role than ever in our daily lives, computer programmers and software developers are becoming more in demand.
Bank loans are never processed very quickly, but other lending institutions are willing to provide cash-in-hand on the same day as the loan application.
Choosing the Right Same-Day Loan
When choosing the right lender or offer, consider the following:
- Interest rates and fees: This is the most important consideration, knowing exactly how much it will cost to borrow the money. The interest rate charged on the loan and the fees payable to the lender may not be stated in the same place on the loan agreement, so be sure to read all the fine print carefully.
- Repayment terms: Make sure you know exactly when the loan repayments have to be completed and what happens if a borrower is late for a payment.
- Positive reviews: Always look online to see whether other customers have had good or bad experiences with the lender.
It’s impossible to completely avoid all risks when lending and borrowing money. There is no foolproof way of guarding against losing money or being scammed by fraudsters – but it’s also true that knowledge is power. The better people understand what’s involved in taking out a personal loan, the more difficult it will be for criminals to mess with their money.