Most people find themselves in a pinch once in a while where they need some access to cash for a project and an unforeseen cost and they’re not sure who to turn to. The best option for a personal loan is a family member, a friend, or someone else who trusts you to repay the borrowed funds. However, many borrowers end up visiting payday advance establishments and paying outrageous interest rates to get their hands on small amounts of money for short periods of time.
One alternative to a payday loan or other forms of short term, high interest financing that can give a borrower access to cash at a more attractive rate is a microloan. These loans are especially easy to obtain for entrepreneurs or small business owners who may have tapped out other sources of financing or who may not have the credit to qualify for loans with local financial institutions. Several websites now attempt to match potential borrowers with potential lenders–private individuals with funds that they’re willing to loan at a specified rate of interest. Microloans typically are issued for between $1000 and $25,000 to a borrower. Here’s how to find access to this money.
Sign Up: The broker trying to match you up with sources of financing will want to do some homework on you before determining the terms of your loan. After you decide who you’ll work with, provide the required information so that your credit can be checked and your information can be verified. As you’re asking for trust from potential creditors, you should be willing to divulge details about your financial situation.
Apply: Once you’ve built a profile, you need to ask for the specific loan you’re looking for. This is where you can outline the amount you’re looking for, the time you think you’ll need to repay it, and the maximum rate of interest you’re willing to pay. The interest rate will usually be based on established guidelines that are derived from your credit score. If your credit history is poor, expect to pay more for a microloan. You can also provide details of what the proceeds will be used for in hopes of persuading potential investors to support your project.
Be Patient: Most websites that offer this service ask for 7-10 days to list your application. If you have interested lenders after that period of time, the deal can close. If not, you can choose to reapply with new terms that are likely to include either a higher interest rate or a faster timetable for repayment. Remember that a higher credit rating will increase your chances of having your application chosen by potential lenders.
Collect: After your application window has closed, you’ll usually receive the funds within just a few business days. The fees that are collected are generally a percentage of the loan amount and they are taken from the loan proceeds before they’re sent to you.
Make Payments: Once the loan has been obtained, it becomes a monthly obligation that you are responsible to pay. Your payment history is tracked and reported to credit reporting agencies which means that this is a good way to boost your credit score but it can also hurt your credit score if you miss payments. A default on your payments will result in the loan being given to a collections agency, a situation that no borrower wants to deal with.
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Posted December 8, 2009 by Admin under Financial News