Almost everyone has been in some sort of debt before, no matter how big or small the amount is. While debt can be a double-edged sword, having too much of it is never a good thing. Borrowing from a finance company would be one of your many options for raising the required funds needed to pay off whatever you need to.
The different types of loans
Different finance companies have different rates when it comes to either secured or unsecured loans. There are different kinds of loans such as personal loans, holiday loans, vehicle loans, or even payday loans. The interest rate can vary between each type of loan and it will normally be higher for unsecured loans as it does not require any collateral.
Advantage of a loan
Having a loan is not necessarily a bad thing as it could help you out during a difficult time. For example, if you require the funds urgently to make payment for your credit card bills or even mortgage payments, you would probably take up a payday loan to tide you through these few weeks until you have received your salary. Be aware that the interest rate will be higher than per normal as it is an unsecured loan.
Borrowing from a finance company
Why do some people borrow from a finance company instead of borrowing from the bank? There could be a few explanations for it: they do not earn a sufficient income for the bank to deem them eligible for a loan, they might have a bad credit rating where they have defaulted or made late payments, etc. The interest rate on loans from finance companies are often more favourable than banks, making it even more attractive.
Calculating the costs
Take note of the hidden costs imposed by each finance company. A $5,000 loan may not simply be just a $5,000 loan to be repaid. You have to note the loan establishment fee or processing fee (if any) and the real annual interest rate. To make things clearer, it would be better to contact them directly and asked them about the principal amount that needs to be repaid (weekly, fortnightly, or even monthly) after all fees have been accounted for. In this manner, you would be able to compare between each finance company and their repayment scheme.
As the borrower, you should read the fine print carefully before penning your signature and committing to the loan. Each finance company has different regulations on how the loan should be repaid, and the onus is on you to make prompt payments. Do not overstretch yourself by committing to a huge loan if you cannot finance it.
Learning how to manage your debt is of paramount importance and it is always best to be prudent and save for a rainy day in case anything untoward happens. You might never know when you will need the funds for a medical emergency or even in an unpredictable situation.