Business owners faces problems financially while running their business. These my resort to borrow money from family member, relatives, friends or go to a lending companies for help.
Acquiring a loan is easy when you know what type of loan is right for your needs and repayment capabilities. Let us discuss one type of loan a business owner can apply for.
Secured Business Loan – A Closer Look
A secured business loan is a type of loan wherein a borrower pledges some asset, can be a car or property, that will serve as a collateral for the loan. Once a borrower defaults on payments, the creditor takes possession of the property, puts it on sale and use the proceeds to pay the debt.
Because this kind of loan is secured with a collateral, you can enjoy a much lower interest rate than an unsecured loan. More entrepreneurs prefer to apply for a secured business loan for this reasons.
Being Aware of the Consequences
Loans always come with risks and secured loans are no exception. Since you have used your property as collateral, you can lose this property if you fail to live up to your obligations. It is important to think of all the possibilities before making a final decision especially because there is a property at stake. But the possibility of losing your property to your lender can be avoided if you will just pay your monthly dues religiously.
You should always keep in mind that three (3) consecutive delays with your payments can put you in a very dangerous situation. If you can’t really submit your payments on time, be sure to call up your creditor to explain your situation.
There are a few lenders that would give you a few days extension. Normally, a 30-day extension is given to a borrower for a chance to keep up with his/her payment. It is also advisable that you ask your lender not to report your late payment to the credit bureaus. This avoids you from a bad reputation of being a late payer. Taking time to inform your lender about your situation will give him/her the impression that you are sincere and willing to pay your debts.
Managing Your Debts
Although some lenders are more lenient than others, it does not mean that you can always request for an extension. Requesting for a little more time should only be done if the situation really calls for it. It is still best if you can pay your monthly dues on time to avoid being tagged as an irresponsible payer. Here are some ways to keep up with your loan payments:
- Make sure that you avoid unnecessary expenses.
- Make an organized list of your expenses.
- Think of ways how you can utilize your finances.
Choosing the Right Secured Business Loan For You
Make sure that you study all your options before coming up with a final decision. Do your own research. Compare the rates. Most lending companies prefer borrowers that have impressive credit history. If you have a good or excellent credit, it won’t hurt if you ask for lower interest rates and a much better term of payments from your lender.
People with bad credit can also apply for a bad credit secured loan. It can help them rebuild their business credit.
Most importantly, make sure that you understand your business loan agreement before signing up the contract. Read it very carefully. Ask the lender or any representative of the lending company if there are things or terms you don’t fully understand. It is best to hire a business lawyer just to make sure that the terms in your contract are fair and legal.
Copyright © 2009 Irish Taylor -About the Author: Irish Taylor is a business loan consultant with https://www.startupbusinessloans.com and has been providing consumers and business owners with unsecured business start up loan since 1992.