The best funding option for ANY situation
From traditional bank loans to the more modern concept of Peer 2 Peer lending, there are a lot of options available to those who need to secure funding. But with so many options available it can be confusing to know which is the best option for you.
Several factors spanning from the amount you want to borrow, how long you want to borrow it for and what your credit history looks like will impact which options are available and best suited to your needs.
In this article we look at four of the most common funding options and when they are best used.
Credit cards are a common funding option which is often used for everyday purchases. These cards are ideal for those who have a reasonable credit history and want to borrow small amounts of money over a short period.
This type of lending works best when you can pay back the full amount at the end of each month, as interest can be high.
However, due to the competitive nature of the credit card industry, those (especially those with a good credit history) can often get very low or 0% cards for a set amount of time. In some cases, this can be the cheapest way to borrow money over 12-27 months.
Securing a credit card can be relatively quick, although they can take anywhere from a few days to a few weeks to arrive in the post.
A bank loan is a traditional and widely accepted way to borrow larger amounts of cash over a longer period.
Bank loans typically offer more favourable rates of interest than your average credit cards, so are more advisable for use when you need to borrow money and pay it back over the long term. However, you are often charged a penalty for paying back a bank loan early as the bank will miss out on your interest payments.
Although technology is speeding up traditional loans, often getting one can be a long and laborious process.
Same Day Loan
Life has a habit of throwing the unexpected at us and this can often result in us needing cash and needing it quickly. In these situations, a credit card or bank loan can be too slow and result in additional fees being added or missed opportunities.
This is where same-day funding comes in. This arrangement usually offers you anywhere from £100 and £3000, which can be in your account within as little as 20-30 minutes after your application has been made.
The interest payment on these loans can be high, so this is usually a good option when you specifically need the cash very quickly and you know you will be able to pay back the amount, plus any interest, quickly.
Peer 2 Peer (P2P) lending is a relatively new concept enabled by the internet and the technologies that it facilitates. A bank loan usually works when the bank receives money (via savings or current accounts) and then lends it out to others via a loan, adding enough interest for themselves to make a healthy profit.
P2P cuts out the middleman. Allowing the original owner of the money to directly lend it to the borrower. This allows the lender to make more from the interest, whilst the borrower pays less interest.
This type of borrowing is ideal for those who want to borrow but cannot get or do not agree with the level of interest charged by a bank loan. However, there can be more risk and effort involved in this arrangement.
Finding the best funding option depends widely on your circumstance. By seeking to understand your options, you can put yourself in the best position to get funding when you need it at a rate that is agreeable and realistic.