The number of loan products has increased over the past 20 years as economic needs and society demand specialization to solve financial situation. From personal loans, education loans, business loans, and even city loans. Firms involved in the manufacture of various financial products include actuaries, risk management professionals, “information and computer science engineers,” and Wall Street. It is necessary to create, upgrade, or liquidate better or worse credit services and products to keep the flow of money in a diverse market that requires funding to address niche demographics.
Signature Loans – Signature loans are what they sound like. A person applies for a loan and signs the promissory note to repay the loan within a certain period of time. This period is known as the “loan term” and can be anywhere from six months to five years. Signature loans typically require good credit ratings and the criteria for loan approval are based largely on the creditworthiness of the borrower and to a lesser extent on the assets. Not all signature loans have the same qualifying parameters. Also, some loans may require good credit borrowers to account for assets in order to identify credit institutions for underwriting purposes. The institution may or may not pledge the asset but still wants documentation to show that a financial or physical asset is actually in the possession of the borrower. Signature loans usually come with lower interest rates than other types of consumer loans such as payday loans, credit card loans, title loans, and some auto loans. More on this later. Who is the lender in the signature loan? Starting with the subsidiaries of large automobile manufacturers to banks, savings banks, finance companies and wage credit companies.
Credit Card Loans – Credit card loans or cash withdrawals from credit cards are another form of personal loan. These quick loans are more readily available to the general public and do not require a credit check. Getting a scratch card will most likely require a credit check or at least an identification process for a guaranteed credit card. Credit card or cash advances usually come with higher interest rates and different fees for access to cash. Various facilities provide access to credit card withdrawals from bank counters, check cashing facilities, and ATMs (ATMs). Fees vary based on the source used to access the funds. To reduce the cost of cash withdrawals, some people have taken advantage of the option of cashing checks so that the card is charged and cash is in turn recovered since there is no ATM fee to pay as the card is charged twice; first from the ATM company and your bank. The interest rates for credit card loans or cash advances are usually higher than for signature loans. There are several states that have usury laws that have lower interest rates on credit cards.
Wedding Loans – A relatively new form of loan to niche the credit industry and meet the growing need for wedding expenses is the wedding loan.
Payday or cash loans are a rapidly growing market as they typically require the fewest credit criteria for loan approval. For quick and immediate credit, one can have bad credit. Proof of income, proof of identity, and a checking account are all enough to secure money.
Automobiles, Motorcycles, RVs, and Boats – These personal consumer loans are typically not just signature loans, but asset-based loans. In other words, a financial lien is placed on an asset to secure a loan to buy or refinance a car, Boat et al.
Small Business Administration (SBA) loans are loans granted to small businesses that are ineligible for a loan from a financial institution for a variety of reasons, including a lack of business history, lack of collateral to “secure” the loan, or insufficient credit history. The SBA is not a direct lender, but acts as an underwriter on behalf of the bank that finances the loan for the company. If the borrower defaults on payment, the SBA pays the bank a percentage of the balance for assuming the financial risk of lending to das company. There are several types of SBA loans that are not covered in this article, but future articles will be discussed in more detail.