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What is a Loan Payment?


A loan is defined by Wikipedia as a form of debt which, like other debt instruments, requires the redistribution of financial assets over time between the lender and borrower. “In a loan, the borrower initially receives or borrows an amount of money, called the principal from the lender, and is obligated repay an equal amount to the lender at a later time. The money is paid back in regular instalments, or partial repayments. In an annuity, each instalment is the same amount. The loan is generally provided at a cost, referred to as interest, which provides an incentive for the lender to engage in the loan. In a legal loan, each of these obligations and restrictions is enforced by contract, which can also place the borrower under additional restrictions known as loan covenants.”

What are Different Loan Categories?


The thought of taking a loan, the reason whatever it may be can be a pretty daunting one. There are several types of loans available to people depending on their eligibility and requirement. There are car loans, personal loans, housing loans. However the interest rates and reparability option vary from bank to bank and from one type of loan to another. In Canada, there are personal secured and unsecured loans, payday loans and consolidation loans.

Unsecured Personal loans


An unsecured personal loan can be very easy to obtain. An unsecured loan requires no collateral and credit score. Usually the amount of an unsecured loan ranges from $100 to $500 dollars. Some lenders may require your credit score and those with a low score will usually pay higher interest rates on their loans.

Secured Personal loans


These have a lower interest rate than that of the unsecured loan. Lenders are more likely to give lower interest rates. With both the secured and unsecured personal loans you will have monthly instalments to pay back the money. If the loan is not paid back, the collateral will be collected in payment to the lender.

Payday Loans


These are possible solutions for small financial issues. Every now and then we all find ourselves short on cash. With most payday loans you can get your money within 24 hours and even have it directly deposited into your bank account. Payday loans should not be used for things that you do not need because they have very high interest rates.

Consolidation Loans


These are made for those who have found themselves in debt particularly for credit cards. A consolidation loan helps by putting all of your debt payments into one payment. The interest rate on a consolidation loan can be lower than that of the rate on your credit cards, making the payments easier to manage. If you are planning to apply for a consolidation loan watch for lenders who claim that you can pay a fee and automatically be approved.

What to Consider when Availing of Loans?


There are certain factors you need to keep in mind when taking up a loan such as a hassle-free repayment scheme and peace of mind. Do you really need the loan? Likewise, find out if the loan suits your financial capacity and future comfort while paying the easy monthly instalments on a timely basis. Also, make sure you have all the details before you take up the loan. You have to know if the interest rates are fixed or variable over the tenure of loan payment. You should also be aware of pre-closure details like how much extra you will be charged or the closing fee. There are several financial companies that deal in lending money to its customers with highly flexible interest rates and easy and comfortable repayment options. They place premium on the repayment factor and customer satisfaction is their primary aim.

What is a Loan Calculator?


The next most important thing is to learn about calculations. For better clarity and understanding, it is advised that the loan taker does his calculations. There are several loan calculators that are available online for free. They are available for each and every type of loan and for different interest patterns. However a loan calculator is only as good as the information you give it so make sure you have all the information you need. Some loan calculators will give you a graphical representation of your repayment details and best possible interest you can get. If you use a good loan payment calculator you should be able to get an idea of what is in store for you in terms of repayments, interest and the total amount paid.

For Canadian borrowers, it is important to learn about the loan calculator that you can use to calculate your monthly payments and loan interest costs for different kinds of loans. For example if you want to get a $10,000 personal loan from Royal Bank of Canada, and you know that the bank will charge you 7% yearly interest rate on the loan over 5 years you can calculate your loan monthly payments (including principal and interest) using our loan calculator below.

Responsibility of Paying Loans


Now that you are aware of the different types of loans, the rules in making loans and loan calculator details, you are now ready to apply for the loan you need and one which will fit your repayment capacity. The key here is to be prompt in paying back what you owe so as to maintain integrity and avoid affecting your credit ratings.

References


canadianfinanceblog.com
canadianbanks.net
wikipedia.org



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