Category Archives: Loans / Lease

Sources of Quick Loans

If you have a poor credit profile and are facing a situation where you need to obtain funds quickly, your options may be limited. You are unlikely to achieve approval for a conventional bank loan, especially if your income is limited. As a result, you may be tempted to pursue quick loans from payday loan companies.

However, if your situation is truly dire, you may qualify for assistance from one or more government scheme. If not, by thinking outside the box, you can almost certainly find alternatives to payday lenders for quick loans that represent less of a threat to your financial well being. The loan sources listed below may serve as resources for one-off quick loans. On the other hand, if you find yourself regularly seeking sources for quick loans, you should re-evaluate your spending habits. You may need to cut back on your spending, figure out a way to boost your income – or both.

Loans From Friends and Family

You may hesitate to borrow from friends or family members because of the possible risk of causing a rift in your relationship. However, if the amount that you need is reasonably small, friends and family can provide a legitimate source of quick loans. Draw up an informal agreement and do everything in your power to repay the loan as quickly as possible. If circumstances beyond your control prevent you from repaying the loan as planned, come clean with your friend or family member, and work out alternate terms for repaying the loan whenever you are able.

Credit Card Cash Advances

If you need the money to pay day-to-day expenses, try purchasing the items you need with credit cards instead. While living off credit cards is not ideal, interest rates charged for transactions is far lower than those for cash advances. However, if you need hard cash and you have no other means of obtaining money, cash advances from credit cards are preferable sources for quick loans than payday loans. If you do opt for a credit card cash advance, borrow what you need in a single transaction if possible, because credit card companies typically impose hefty charges on each transaction.

Credit Union Loans

Local credit unions are a good source for quick loans. Interest rates for credit union loans are much lower than those for payday loans, and credit unions are often more lenient with credit than conventional banks. You must be a member in good standing; however, it is likely that you are eligible for membership in at least one credit union in your area.

Bank Overdraft

If you have funds available, you may tap into your bank overdraft as a source of quick loans. If you opt to draw from your overdraft, never go over your pre-arranged limit. Otherwise you will encounter fees that nearly rival those of payday loans. You should also repay the overdraft as soon as you are able.

Whole of Life Insurance Policies

If you have been paying premiums for a whole of life insurance policy, you might have accumulated a tidy sum that is available for you to borrow against. Ordinarily, drawing funds out of your life insurance policy is not a good idea, especially if you intend to use those funds to finance your retirement. However, if you are desperate, withdrawing funds from a whole life insurance policy is preferable to obtaining a payday loan.

Pawnshops

Did Great-Uncle Frederick leave you a valuable pocket watch? If so, you may be able to obtain the funds you need from a pawn shop. Bear in mind that pawn shops will only allow you to borrow a fraction of the value of the items that you offer as collateral. If you have any doubts about your ability to repay, think twice before opting for a pawn shop loan. If you default on repayment, the pawn shop will confiscate Uncle Fred’s watch.

Payday Loans

If you are absolutely at the end of your financial rope, payday loans may indeed represent your only alternative for quick loans. If so, look for a lender that is registered with the Office of Fair Trading. Seek out a loan with a repayment period of at least 30 days and borrow as little as possible. Do everything in your power to repay the loan in full on your first repayment due day. Rollovers can quickly cause a modest payday loan to escalate into an amount that you will find nearly impossible to repay.

Funding Circle for Business Loans

Peer-to-peer lending sites are still a growing phenomenon in the UK. Their publicity efforts tend to centre on their benefits for investors, mainly the relatively high interest rates they offer to savers. The success of the sites depends on winning over lenders looking for a home for their savings: there is less material out there about their advantages from the point of view of borrowers.

It’s assumed that potential borrowers, particularly business borrowers, will find their own way to the sites with minimal encouragement, given the tight credit market of recent years.

If you run a company that’s in need of investment, the financial climate isn’t easy. It’s hard to get backing from the banks, even for small loans. What are your options? Of the top three UK peer-to-peer sites, the biggest one for business borrowing is Funding Circle (FC).

Who can borrow through Funding Circle?

A business is eligible to apply for a loan of between £5,000 and £1,000,000, if it

* Has a turnover (not profit) of over £100,000 per annum
* Has filed accounts at Companies House for at least two years
* Is a limited company or LLP, not a business run by an individual or a partnership

The loans are repayable over a period between six months and five years. A personal guarantee for the loan is expected in all cases, and for larger loans over £100,000, the site requires security to be given, either on a specific asset to be bought with the loan proceeds, or generally over company assets.

How does it work for borrowers?

A business needing to borrow must initially complete an online application. Funding Circle estimates that should take about 20 minutes. They aim to process the information, complete routine checks, and revert to the borrower with a decision within two days.

FC will do a credit check with Experian, and will also check with CIFAS as to whether any fraud has been recorded in connection with a company director.

The borrower’s proposal may be accepted or rejected outright, or Funding Circle may request modifications in the terms or the security required. In some cases, the company may be restricted to borrowing a smaller sum that they had intended. Depending on FC’s assessment of the borrowing company’s financial strength, and the degree of risk in lending to them, the loan request, once accepted, will be assigned a ‘risk band’ which determines the range of interest rates allowed for the loan. The rates range between 7.2% and 11.5%, as at November 2013.

Once agreement has been reached on terms, the loan proposal will appear on the FC website, with information about the company’s credit rating, accounts, and the purpose of the loan, together with details of any guarantee and/or security.

Within the assigned risk band, lenders can offer to lend money at their chosen rate, which is driven down in a reverse auction as successive lenders place their ‘bids’. The more popular the lending proposition, the quicker the interest rate will go down. It usually reaches the minimum for its particular risk band, but may not do so if the proposal doesn’t appeal to the lender members of the site.

Appealing to lenders

To ensure the best chance of your proposal attracting the lowest interest rate for its band, make your proposal full and convincing. Describe your company mission and values, and explain why you need the money as precisely as possible.

Make sure that any issues with your credit score have been resolved with Experian as far as possible, as the company credit rating is very important to lenders. Above all, answer their questions as promptly and fully as you can, even when, as is sometimes the case, they are phrased less than diplomatically. Far fewer people will lend on a proposal with unanswered questions outstanding, or with questions they think aren’t answered fully.

After the auction

When the loan is fully funded, usually at the minimum rate for the band, the borrower must decide whether to accept the proposal or not.

If it’s accepted, the loan, consisting of 10’s or 100’s of small slices coming from individual investors, will be administered by FC who will distribute the repayments between the investors and chase up late payments. They will be responsible for collecting the debt through the courts if necessary, and will enforce any guarantee or security, should the loan go bad.

If you are thinking about borrowing through Funding Circle, it’s a good idea to get familiar with the website and watch a few auctions first. You can get an idea of the process and also the sort of questioning you may face from potential investors.