Financial needs and personal finance management are important factors in our lives. Every individual has a different set of financial needs based on many considerations, such as age, career path, personal goals, etc. Hence every person would have a different way of managing their own personal finances.
In the process of managing personal finances, unexpected need of money beyond one’s current financial capacity is something that cannot always be avoided. This may lead to taking a loan from a bank or a financial institute or even a family member. But how can you choose a right loan type that suits your needs and repayment capability? Hopefully the following article will help you to do this easier.
1/ Different financial needs
Depending on various factors, such as age, career path, personal goals, etc., everyone will have a different purpose to get a loan. For young people who are still in universities, they often need a small loan to pay their tuition fees or buy a new laptop to support their education. For people who have been working for a few years, the demand for a loan may come from higher needs, such as: buying a new motorbike or a tablet to work anywhere without carrying a laptop. As for people with stable jobs and middle-aged people, their demand for a loan is often used to serve larger purposes, such as: investment, opening a business, buying a house, investing in education for their children, etc.
While the purpose of the loan may differ from individual to individual, it all comes down to one common need – that sometimes people just need an extra amount of money that can be paid off later. Hence, almost every bank and financial institution offers a range of loan types to suit different needs.
2/ Common types of loans
An overdraft loans is an approved amount of money that you can use in excess of the current balance in your account. Once you have successfully applied for an overdraft loan, your bank will issue the approved loan limit for you to use when your account balance hits 0. The outstanding benefit of this loan type lies in the fact that your loan limit can be relatively high as it can go up to 100 millions VND or 5 times higher than your monthly income.
Overdraft loan can act as a “financial savior” for situations where you have accidentally used most of your monthly budget and you still need money to pay for daily expenses or necessities. Suitable customers for this loan type are employed people with a relatively stable monthly income or small business owners requiring money to pay for expenses.
This is the type of loan that does not require being secured by mortgage assets. Any application for this loan type will be reviewed and approved based on one’s financial reputation. Your financial reputation will be evaluated through your monthly income or credit crating. Unsecured loans can be used to cater to those who need to pay expenses for weddings, holidays, etc..
Unsecured loans can offer a high limit of up to 500 million VND to use for 60 months. However, in similarity with overdraft loans, suitable customers for this loan type should be people with stable monthly income that can afford to repay for their loan.
This is the type of loan that requires being secured by mortgage assets. These mortgage assets must be ensured to be at interest for borrowers. With this loan type, the bank will keep documents related to the assets used for mortgage. Mortgage loans should be picked when you need money to use for large investments such as opening a business, stock investment, buying a house, etc. The approved loan limit can be significantly high as it can get up to 70% – 100% worth of your mortgage assets.
When using an installment loan to purchase a product, you will not have to pay the entire price of the product at the time it is purchased. An installment loan is a loan that is repaid over time with a set number of scheduled payments. To meet different needs, banks and financial institutions will have different interest rates and repayment periods for customers to choose based on their financial capabilities. This loan type is suitable for customers who are still in universities or have only been employed for a short period of time that need money to buy necessary facilities to support their education or their jobs.
3/ Things to consider before getting a loan
With all these available loan types offered by banks and financial institutions, you need to carefully consider your needs as well as all information related to the loan type you are aiming for. Personal factors needed to be considered include: your loan purpose, your desired loan limit, your monthly income, your repayment capability, assets that can be used for mortgage, etc.
Some important information related to the loan type you are aiming for can be the lowest & highest available loan limit, the length of time it can be used for, repayment method, interest rates and how interest is calculated, all terms & conditions related to the loan type, reputation of the selected bank, etc. Equally, you should carefully discuss and consult bank staff to be able to choose the most suitable loan type for yourself.