You need a loan. You’re not crazy. You’re not unusual. By admitting, “I need a loan ASAP”, guess what you’re actually doing? Reiterating the fact that you’re normal. Most Americans must use some form of loan to get by at some point in their lives and needing financial assistance is not a crime.
The most stressful part of needing a loan is the suddenness. Maybe your bills have been escalating for quite some time, but it’s just now that you’re realizing you’re not going to be able to pull off all the deadlines and pay all the bills without assistance. You don’t have to. With countless loan options and many educated professionals to offer advice along the way, instead of saying, “I need a loan ASAP,” you’ll soon change it to, “I found a loan ASAP.” Just be sure to follow these five rules on your quest for loan cash.
Don’t Have a Mental Breakdown
I need a loan ASAP. It might be the only thought that’s crossing your mind right now, yes, but don’t let the shocking lack of cash and the need to remedy the situation control you. More than ever, now is the time when you must calm your emotions and think only with your head.
Studies published by the Association for Psychological Science show that when individuals are asked to make decisions under stress, they focus heavily on the potential positive outcomes and don’t pay much attention to the negative consequences. It’s partially why addictions have such power over the mind. During the stress of withdrawal, all the individual can think about is the potential positive payoff. They ignore the repercussions.
Keeping your wits about you is the best tactic when facing a seemingly impossible financial situation. You will be better equipped to make decisions to solve your present struggles, but those decisions will not cause you harm in the long run. The next step is just as important and can help you keep a level head – you need to get in touch with the facts.
Review All Aspects of Your Finances
Taking out a loan is a serious financial decision. Long before you even consider putting in an application, you must intimately acquaint yourself with each and every aspect of your financial standing. It’s imperative that you understand your current budget in full before explaining your need for a loan to a lending organization. You must know your monthly debt total, your other monthly bills such as utilities, and how much money you earn every month.
First, list all of your monthly income. Include any spare cash you make from side jobs, any child support received and any monthly contributions from other household members. Take into account the total in your savings account. How much do you have available right now to pay for your sudden financial crisis and how much will you be able to scrape together in the months to come?
Next, list all of the debts you owe. You should know the minimum monthly payment, the terms and interest rates and the grand total owed. Here are examples of the types of debt you may own:
- Credit Cards: credit card monthly minimums are usually based on the amount of money charged. Most companies normally charge between 1 to 4% of the total, plus interest. If you are not sure how your minimum payment is calculated, contact the company and find out. That way, you can plan your budget well into the future based on the progress you will be making each month with payments towards the grand total.
- Student Loans: student loans are designed to be paid back in monthly installments. Depending on the amount, the interest rate and the length of the repayment plan, the total monthly payment will differ. For example, a $20,000 loan with 6% interest, set to be repaid in 15 years will have a monthly payment of almost $170. For the same loan amount and interest rate with a 10 year repayment schedule, the payment goes up to over $220. Unlike credit cards, student loan debt is not revolving and the same amount is due each and every month.
- Taxes: owing the IRS money is not ideal, but sadly, due to oversights when filing or setting up withholding amounts, many individuals accumulate back taxes. If you are in good standing with the IRS, you are eligible to sign on to an installment agreement, making tax debt repayable in monthly or quarterly increments. In this case, the installment agreement will make the monthly payment similar to how student loans are calculated.
- Mortgage: if you have a mortgage or even a home equity line, the monthly total is set in stone by the mortgage lender. You know what to expect each and every month.
- Medical Debt: medical bills may be the most sudden and detrimental to your financial stability, especially if you have no insurance to cover even a portion of the costs. This may be the reason you’re thinking, “I need a loan ASAP!” Even so, before you begin to pursue loan options, talk to the billing office about what you can pay and try to work out an installment agreement in the meantime while you gather the funds together.
- Car Loans: just like student loans and mortgages, car loans are set up as a permanent monthly bill set to last for the duration – 36 months, 64 months or more. Once the last bill is paid, the monthly obligation disappears, but until then, understand how much you owe and know the due date.
Now it’s time to look at the additional bills that add to your budget’s burden.
- Utilities: water, electricity, gas or oil heat – these bills may seem to pop up out of nowhere, but you must pay them or face the consequences via shutoff or bad credit marks. Call your utility company and ask them on what days they bill each month and your average usage over the course of the past year. Even though the bills may fluctuate slightly with the seasons, you can begin to realize how much you must budget for each month to cover every utility.
- Cell Phone or Internet: most individuals cannot function in today’s society without a phone and access to the web. If you also pay for cable television, add that to this category as well. Unless you use up your minutes and data early, you should be able to tell how much you will owe from month to month well ahead of time.
- Insurance: car insurance is essential to keep your vehicle on the roadways and you may pay for life insurance to as a safeguard for your dependents.
Don’t forget to measure how much you usually spend at the gas station and the grocery store each week. Anything extra – gym memberships, haircuts – should be included in your list of monthly bills as well.
Now that you are aware of your monthly cash flow and your monthly financial obligations, you can see how much money you have left over. Is the spare cash and your savings enough to cover your bills?
If not, your original thought, “I need a loan ASAP!” is probably true. You require a financial helping hand to overcome the gap.
However, even if the money left over after bill pay isn’t enough to cover the entire bill, now you know what you can afford for a monthly loan payment on a cash advance that DOES cover your unexpected expenses.
Understand Your Credit
Most likely, at some point in the loan application process, your credit score will come up in conversation. Even if you opt to apply for a bad credit loan and forego a credit check, you’ll at least be thinking about your credit score and mentally assessing where you stand.
Just to clear up any misconceptions you may have about how your credit score is calculated, here’s what you should know and understand about credit:
- Payment History Matters
Paying your bills on time accounts for 35% of your score. Late payments, including the length of time the bill went unpaid, will cause a score to drop. The time between occurrences is also taken into account.
- How Much Do You Owe?
If you have multiple credit lines or personal loans that are entirely maxed out, that will not bode well for your score. Utilizing less than 30% of your approved credit maximum signals to additional lenders that you have the ability to pay back the money and you aren’t living outside of your means.
- Types of Credit You Use
Lenders look more favorably on a person with a diversified credit history – including a car loan, a mortgage, and retail credit – rather than an individual who only uses credit cards.
- How Long Have You Had Your Accounts?
If you just opened your credit line, you will not have had time to build up a history of on-time payments, so your score may be lower.
- Have You Been Asking for Loans Lately?
The number of times you’ve inquired about interest rates and loan terms will show up on your credit report and have an influence on your overall score.
Now that you know this information, you can monitor your credit for mistakes. If you always pay your bills on time but you still have a rock bottom score, it’s time to get a free copy of your report and watch out for errors. You can contest issues with your score and have incorrect entries expunged. Knowing how your credit report and score reflect on you can help you in the loan selection and negotiating process.
Research the Types of Loans Available
Loans come in two different forms: unsecured and secured. An unsecured loan is based on nothing more than the credit profile of the applicant and their current financial standing. Lenders do not place liens on any assets to guarantee the money is paid back. As such, unsecured loans are considered a riskier investment on the part of the lender.
Secured loans are based on an item of value – a house, a car, a boat, etc. The lender holds the title until the borrower completely repays the money. Intangible assets such as a stock or bond can also be used to obtain a secured loan.
Depending on your credit score and your portfolio of assets, you may choose from many different loan types. Here are few popular loans:
- Payday Loans: a payday loan is a cash advance on your next paycheck. The finance charges are much higher than most other types of loans, and you must pay it on time or it increases as you continue to roll over the payback deadline. For example, borrow $200 from a payday lender, and you are required to write a check for $230 on the spot. They will not cash it until your next payday, but if you contact them and ask to delay the repayment for an additional pay period, that fee is only going to go up. Payday loans are a good instant cash solution, but the high cost cause some to steer away out of caution and the need to repay it immediately.
- Personal Loans: personal loans are usually given out to borrowers with strong credit histories, but many new lenders are offering personal loan solutions to bad credit borrowers as well. A personal loan is also called an installment loan, since it works much like a car payment or mortgage. Pay off the total in small doses each month according to a predetermined payment plan and locked interest rate.
- Title Loans: get a cash loan in exchange for your car or boat title. The title acts as security and ensure the borrower gets lower interest rates and more desirable repayment terms. It is similar to a regular car loan, but the borrower can drive the car and have cash to spend while they pay it back in monthly increments.
- Equity Loans: if there is any equity in a home, the homeowner can apply for an equity line or a second mortgage, taking out a specified amount of money for personal use. Sometimes there are restrictions on how the cash is utilized.
These common loan types all have specific advantages that will appeal to different borrowers depending on their assets, their credit score, their desired monthly loan repayment amount and how much money they need up front.
- Chase Your Goals
Once you’ve narrowed down your loan options, put in an application, achieved approval and scored cash, it’s not time to back down now. Don’t shrink away from your original intentions when you first thought, “I need a loan ASAP!” You can talk to qualified professionals about the best choices you can make in order to right your financial ship and ensure smooth sailing. Share your concerns and ask questions of the loan advisor assigned to you through the application process, or schedule a free trial session with a local finance expert.
Remember, if the purpose of your loan is to attack and eliminate debt, beat down the bill with the highest interest rate first. That will make sure you’re paying less money out of pocket over the course of time. Managing debt elimination while maintaining lifestyle standards is a balancing act, but it’s not something you can’t handle, especially when you have the online resources and person-to-person, friendly advice many loan companies offer.
Needing a loan ASAP is not shameful, but avoiding the problem is. Now that you’re informed about how to mentally prepare yourself by calming your emotions, knowing the facts, understanding qualification factors and obtaining knowledge on all your options, it’s time to begin your loan search today.