Wednesday, December 19, 2012

5 Alternatives to Bank Loans | epica Personal Finance Blog

At some point in life, most people need to take out a loan, whether this is to help make an essential purchase such as a car, carry out an urgent repair in the home or to put towards a much needed holiday.

But as bank loans are still difficult to secure because of the struggling economic climate, you may want to start to thinking about the other options available to you.? Many people do not know what kind of alternatives to a bank loan are out there.

Read the information below and you?ll soon see that you can indeed borrow money without having to wait for the banks to start lending again.

Peer-to-Peer Lending Loan

So-called peer-to-peer lending takes place outside of the traditional banking system and one of its advantages is its simplicity. Peer-to-peer lending takes place online and lenders offer unsecured personal loans at an interest rate of their own choosing or that of the online platform. Importantly, you aren?t guaranteed to get a loan through the peer-to-peer lending as different lenders will weigh up the risks of lending you money, but you do have the immediacy of dealing directly with a lender and no upfront collateral is needed for a loan.

Credit cards are more familiar territory than other loan systems. There is a wide range of credit cards out there to choose from and they offer different limits and interest rates. The problem can be that the interest rates can be high on credit cards and so it?s important that carefully check this. However, there are also credit cards out there which have interest-free repayment periods, some of which are over a year. And so, if you do borrow a small amount on a credit card this should pay back less in the long run than you would with a bank loan, as you can pay the money off during the interest-free period. If you can?t get a credit card with a long interest-free period, you need to carefully consider the total repayment.

Government Credit

Another option instead of a bank loan is government credit. There are several different types of government loan, from crisis loans to help if you have had a flood or fire in your home and need urgent repairs to schemes set up for particular groups. For example farmers can currently get cash loans in Canada from the Canadian government who are trying to give them easier access to credit. Government loans can be very good if you are in one of the targeted groups or qualify for assistance, but these are not open to everyone and especially not for everyday purchases.

Borrowing from Family and Friends

The easiest way to secure a loan is to take the most direct route and borrow this from your friends and family. While this is a simple process, it isn?t without obvious problems. You have to think carefully about not making relatives feel pressured into lending money in the first place and you need to be absolutely certain you can pay this back. Nothing sours family relations like a dispute over money. If you do borrow from friends and family you should try and limit the amount.

Payday Loans or Short Term Loans

Since the start of the financial crisis there has been an increase in the popularity of payday loans. These are small and short-term unsecured loans. They are used to bridge a gap and you can only borrow a limited amount (often only up to ?500), plus you are given only a short time frame to pay the loan back. Payday loans can often be organised online, and even though the interest rates can look very high, remember that you will be paying this back over a very short space of time. So, if you are confident you can pay the loan back quickly and it is only to be used to bridge a gap (e.g to pay for an emergency repair that you otherwise wouldn?t have able to afford until payday) this type of loan might be an option for you. If you are not sure of your future finances, be mindful of the high interest rates attached to some payday loans and the possibility of getting into a cycle of debt.

Source: http://epicafinance.com/5-alternatives-to-bank-loans/

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