Powered by Blogger.

Bank Credit

Friday, April 4, 2014

When dealing with a bank, credit can be a difficult issue to deal with. Although banks are often the first lending source that comes to mind when a prospective customer needs extra money, banks also have the most stringent loan procedures, credit requirements, and also the most extensive documentation and paperwork. When applying for a bank credit card, one thing you must remember is that a credit card does not offer the same benefits as a personal loan.

To obtain bank credit the bank will check only the applicant’s credit, payment history, and other stability factors, but also make their loan approval decisions based on the amount of risk posed to them. That’s why, in most cases, they require collateral in order to obtain a larger loan. This is also the case for many bank credit cards, whether one realizes it or not. This means that they secure the loan on valuable assets the borrower has. Traditionally, this is a home or car. A lien is placed on the asset until the loan is paid off. In the event that the loan defaults, the bank can foreclose or sell the home or asset in order to repay themselves the money that is owed.

Naturally, while this removes much of the risk for the bank, it poses a lot more risk to the borrower. This is even more strongly the case for business loans. A new business owner may be hesitant about risking his hard earned assets that took him years to earn in exchange for a business venture that has potential but not certainty.

The alternative to this situation are lenders that offer unsecured loan options. Although these companies are not as prevalent as traditional banks, they offer many more advantages and innovate programs to customers. It is important to assess personal risk when considering financing.

No comments:

Post a Comment


Most Reading