• 29Dec
    Categories: Lending Comments: 0
    Handshake with the transfer of money

    Is peer lending the right thing for you? Many consumers are choosing peer lending as a viable solution to handle their borrowing needs. This is as a direct relation to the decisions being made by the credit card and banking procedures. Many consumers are being faced with the ongoing challenges of tough lending practices.

     

    Saving Money

    Some consumers are not able to get a personal loan or when they can get a personal loan, it is only those with high interest rates. There are many peer lending services that offer lower rates (as low as 7%) and so that is why consumers are switching to save money on lower interest rates compared to what the credit card and banks would charge. For that reason, peer lending companies have the ability to compete with financial institutions and credit card companies. With no overhead costs or operating costs, peer lending companies can offer lower interest rates.

     

    Specific Requirements

    For consumers with better credit scores, peer lending services offer the ability to borrow larger amounts at a fairly low interest rate. However, despite this, not all consumers will get one of these loans. There are still specific requirements that have to be met by borrows prior to receiving one of these loans. There are a wide range of different requirements as it relates to the different companies. It could be the borrower’s credit score. It could be a threshold of debt to income ratio. It could be the number of delinquencies, credit inquiries and how credit has been utilized by the borrower on other credit cards. Most lenders still prefer to have a screening process to limit the borrowing risks.

     

    The Process

    You may be wondering how the peer lending process works. It is similar to the business model where the lender and the borrower directly work out an agreement without having a third party lender involved. Peer lending uses an online platform where the borrower lists their loan requests, which includes the amount, the terms of the loan and the interest rate. A number of lenders bid for the loan listing that fit their criteria. The lender also looks at the borrower’s profile, which should include the borrower’s monthly expenses, income, creditworthiness, credit scores and any other necessary information. These parameters are used to calculate the borrower’s debt to income ratio in order to determine qualification.

     

    The Borrower and Investor Relationship

    For borrowers, the goal is to get a higher loan amount than traditional banks offer. For the lender, there are risks associated with lending a higher amount, but they are willing to take that chance. In fact, most of these investors have calculated their risks and found ways to minimize those risks. On the other hand, some peer lending companies also have investor requirements of a specific net worth and yearly gross income. With these requirements, investors then prove that they can tolerate the financial risks that may be involved with the process.

     

    Closing

    The peer lending trend is one that is going nowhere as borrowers are tired of being turned down by financial institutions and credit card companies. Before you seek peer lending service, it is best to be aware of what is involved and understand your responsibility.

  • 18Dec

    businessman looking to graph

    Do you have a lot of debt? Have you borrowed a lot of money and are now having a hard time paying it back? If you answered yes to those questions, then know that you are not alone. Millions of Americans struggle with debt, but fortunately, there are ways to gain control over debt and to get back on the right track.

    One option that you have is to consolidate all of your loans so that you’re just making one payment instead of trying to juggle several at once. There are many advantages to going this route, and, while it may not be for everybody, it is a great choice for many people.

    Save Money

    To begin with, it’s important to understand how loan consolidation works. Basically, you take out a single loan, use it to pay off all your other loans, and then just focus on paying back the remaining loan.

    As long as you get a good interest rate on your consolidation loan, this strategy can end up saving you a lot of money, especially since most of the debts you were trying to pay off likely had high interest rates. When you’re just paying on a single low-interest loan instead of paying on several high-interest loans, you’ll save yourself a lot of money each month and in general as well, which can help you to get your credit back on track more quickly.

    Just Make One Payment

    When you have a lot of debt that you’re struggling to pay off, it’s easy to get overwhelmed. There are multiple due-dates to remember, multiple addresses to send the payments, and so many other details that it all gets confusing, and when people get confused, they often make costly mistakes or miss payments altogether.

    You can put an end to the madness (and the stress that goes along with it!) by consolidating your debt. Once you do that, you’ll only have one payment and one due date to keep track of, and that’s a WHOLE lot easier!

    Get Help for the Future

    If you go with the right debt consolidation firm, you may be provided with free credit counseling as part of your agreement. This counseling can be infinitely helpful for those who struggle with money, debt, and all things financial. With the right counselor, you could end up learning better habits that will help you in the future and creating detailed plans for how to get and stay out of debt for good. Imagine having that kind of financial freedom for good!

    Of course, not all loan consolidation firms offer this option, so check to be sure that yours does and that it’s just a good, reputable company in general. The firm you choose can make all the difference, but if you do choose carefully, you can enjoy all of the advantages discussed here and many more.

  • 14Dec

    Usually, a company will seek financing help in order to grow and maintain their business. These business owners will usually try to find financing from traditional sources such as unsecured bank loans. Why? This type of financing is thought to be less costly when it comes to borrowing a loan.

    Financing Issues

    However, for a lot of small business owners, financing is an issue because they may:

    •       Not have a long business track record
    •       Not have the credit rating required

    For this reason, many small business owners’ loan application from a traditional bank may be rejected. This has been the case in the most recent years after the economic crisis in the United States. Lenders were and still are cautious about approving these types of loans.

    Lines of Credit

    Oftentimes, there are some small businesses with lines of credit from traditional financial institutions, but still are unable to acquire additional funds since the extension of funds beyond the credit limit is a concern. For that reason and in such situations, the future growth of the business could not be based on a traditional bank loan.

    Based on Assets

    In this case, what should a business owner do when there are outstanding account receivables and because of this, the business is at a shortfall as it relates to working capital? In a situation like this, the business can look at a different form of financing such as asset-based lending. Now, what are some of the differences with traditional financing and asset-based financing? What are the advantages one has over the other? Let’s explore.

     

    1. The Differences

    Asset based lending allows the business owners additional flexibility for financing the existing operations and the business needs for further growth. In comparison, traditional lending from a bank requires the financial institution to lend on the premise that the business will have to be first assessed. It also involves a projection of the business’s future cash flow. Asset based lending is based on the company’s collateral and not on the success of the company’s operation.

     

    1. Accounts Receivables

    The typical asset based loan is made against the accounts receivables. In this case, the lender will advance a specific amount of money to the business in lieu of how much value is placed on the receivables provided to the lender. The rate of advance is usually between seventy percent and ninety percent. Instead of sending accounts receivable payments to the borrowing company, the creditors will send payment directly to the lender. The lender, in turn, will provide the appropriate balance to the borrowing business, subtracting any fees charged on the loan and any potential fee for the management of the collection process.

     

    1. Revolving Credit

    Asset based loans are considered revolving lines of credit, which means that when the accounts receivable balance goes down, it provides additional source of funds for the business owner. Even though lenders of asset based loans also consider other assets such as equipment, inventory and real estate, accounts receivables are usually the most frequently used collateral and this is largely due to the fact that it carries a significant amount of liquidity.

     

    1. The Loan Process

    Lenders of asset based loans place more emphasis on the quality of the business’s collateral and not necessarily on the credit rating or cash flow of the borrowing business. The borrowing business’s ability to repay the loan is what is evaluated. The business’s track record of how previous payments have been made will establish their worthiness in being considered for additional credit. In the case of a traditional bank, the internal lending standards leave the lender to be more restrictive in the loan process.

     

    1. The Restrictions

    For instance, traditional financial institutions like banks won’t approve a loan for a company that has a debt-to-capital ratio of more than 4:1 or 5:1. In comparison, an independent lender of asset based loans will not be subject to these restrictions. For that reason asset based lenders are free to finance small businesses with low capital or those that have not met the internal lending standards of a traditional bank. Instead, the asset based lender looks at the long term prospect of the business.

    Conclusion

    Because the asset-based lender does not use the borrowing company’s performance as it relates to operation, but looks more at the quality of the accounts receivables, the business does not require as much financial covenants as a traditional loan requires.