Emergency Loans – Benefits and Risks

Emergency Loan

Have you ever wondered who can lend you money at the time of an emergency? Moreover, what is the motive behind them being so benevolent towards you? Money lenders are of many kinds. Small size like local money lenders, medium size as financial institutions and lastly large sized money lenders as banks. All money lenders offer you money in return of the interest they earn on that.

Most banks and financial institutions have excess money with them. They use their role as a money lender to use the surplus funds to lend out to people who need funds. The rate of interest depends on a list of factors.

Firstly the amount of interest charged by money lenders depends on the amount of money lent and the period lent for. Naturally the larger the amount lent and the more the period of repayment, more is the rate of interest.

Secondly, the rate of interest also takes into consideration the principle of future value of money. What you can buy today with $ 100 would cost more a few years later. The value of money changes with inflation and time. As a result money lenders have to adjust the money lent out today with the future value of money. This is adjusted in their rate of interest.

Other factors governing the rate of interest for money lenders are the terms and conditions. Sometimes, money lenders lend money on a fixed rate of interest. In such a case the amount of monthly instalment is fixed. Sometimes, the money lenders lend money on a flexible rate of interest. In such cases the rate of interest charged changes with economy.

There are many ways that money lenders offer loans. The traditional mode of money lenders is to visit a bank or financial institution and apply for a loan. Thanks to technological advancement, people now a day prefer to opt for online applications. Money lenders are discovering the growing opportunity in this field and exploiting the same.

Money lenders may lend secured or unsecured loans. In case of secured loans, you have to pledge an asset or security and take a loan against it. In case of unsecured loans, guarantee of any sorts is not required. Unsecured loans are mainly given to salaried people for small sum of money.

Money lenders offer different rates of interest and repayment options. It is prudent to go through all of them to understand, which one is suitable for you.

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