Personal loan guarantee not basis.: An article from: Journal of Accountancy
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Citation Details
Title: Personal loan guarantee not basis.
Author: Charles J. Reichert
Publication: Journal of Ac
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The Complete Idiot’s Guide to Person-to-Person Lending
Forget credit card companies- make it personal!The Complete Idiot-s Guide- to Person-to-Person Lending fills readers in on what they need to know, such as how person-to-person lending works, who lends and who borrows, and the advantages and disadvantages of Virgin- Money, Prosper, Zopa, and Facebook-s Lending Club.M-Loans on Prosper and Facebook-s LendingClub rose to 0 million in 2007; by 2010, the online banking report forecasts billion in person to- person loan originations-Javelin Strat
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Secured Personal Loans
Secured personal accommodation have a history that dates back to centuries before the advent of modern banks and financial institutions. Even in the ancient times, borrowers were able to draw funds only when the lender was given rights to certain assets. Though a vast change is visible in the lending policy today, the popularity of secured personal accommodation sees no decline. Though homeowners do have the option to take unsecured personal accommodation, a majority of the group prefers to have accommodation the secured way.
Mere apprehension of losing homes through repossession fails to motivate borrowers to change loyalties. At least borrowers who have been regular in credit transactions or had not more than one or two incidences of bad credit will not put their weight for accommodation without collateral. Loans without collateral or unsecured personal accommodation do not claim a direct charge on the borrower’s home, but compensate the risk with a very high rate of interest and equally strict terms. Therefore, while the safety of home is ensured, the cost of loan rockets up.
It is obvious that the cost of secured personal loan is lesser because of the lower interest rates and less strict terms. When the loan comes over for repayment, secured personal accommodation will be easier to repay because of lower cost involved.
The intention of loan providers who try to influence the decision of borrowers to take secured personal loans is often viewed disapprovingly. Lenders prefer secured personal accommodation because of the lower degree of risk placed by them. People interpret this as the lenders eye on their home. Lenders are in no way interested in repossessing house or any other asset kept as collateral. Since, repossession, maintenance and liquidation put a huge cost on the lender, he would better allow the borrower to himself repay the loan provided. Only in the most extreme of cases when the loan appears to become a bad debt, lenders undertake to repossess collateral.
Consequently, the fears regarding secured personal accommodation are misplaced.
Advantages of secured personal accommodation are numerous. Principal among them is the treatment meted out to borrowers who opt for secured personal accommodation. The preference that the secured personal loan borrowers enjoy is well known. Since the fate of an asset of theirs is on stake through collateral, not many borrowers would take the step to be irregular in repayments. Consequently, the risk involved in secured personal accommodation is lower. Leniency in other terms is the result of the reduction in risk.
Interest rate, for instance, is the lowest in secured personal loan. Typical APR ranges from 6% to 25%. The interest rate chargeable on any other loan will be much higher. The asset pledged towards collateral assistances determine the APR that the borrower has to pay. Home and real estate property commands the lowest APR. Automobiles and title to motor vehicles too command a good interest rate, albeit higher than in homes.
The collateral offered also determines the amount that can be had through secured personal loan. Home presents the safest bet for lenders. Thus, maximum amount will be lent against home. As a rule, the largest amount is offered through secured personal loan . When secured personal accommodation is offered against home, it is the equity that decides the amount of loan offered. Thus, borrowers planning to use the loan proceeds to huge expense heads like debt consolidation, home improvement and car purchase will be benefited more through a secured personal loan.
Though the repayment options presented to the borrowers of secured personal accommodation are no different from that available to the unsecured accommodation borrowers, repayment is a relatively smoother journey for the former category of borrowers. Most lenders will make the terms of repayment flexible enough to suit borrowers. Some loan providers have deployed experts to educate borrowers about the various options that are available to them for loan repayment. The method used for disbursal of loan will be suggested after gaining a proper knowledge of the borrowers financial condition. A proper study indicates if the borrowers’ finances will be able to support the repayment method and the loan itself.
Secured personal loan do have a few drawbacks. Proper decisions and accurate planning on secured personal loan however minimise the impact produced by these drawbacks.
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Review by Ann Logue for The Complete Idiot’s Guide to Person-to-Person Lending
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People are fed up with banks, for good reason: too many banks have behaved irresponsibly, looking to milk as much money out of customers in as short a period as possible rather than build a long-term relationship. And, in this economy, many people are finding themselves in need of a loan from family and friends. This book sets out all the different ways that people can lend money to each other to make money (anonymous peer to peer lending sites), help those in need help themselves (microfinance), and borrow money from relatives without destroying family relationships. This is a great guide.
Review by Book Worm for The Complete Idiot’s Guide to Person-to-Person Lending
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Social lending is an amazing alternative to big bankers! Why not avoid the high fees and rates of banks and save by borrowing money from family and friends? Plus, if you want to loan money, you can typically earn a much greater rate of return than you can with CDs. It’s a win-win!
Review by D. Ogino for The Complete Idiot’s Guide to Person-to-Person Lending
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Being someone that has a career in consumer lending, it is very stimulating to know that someone is finally thinkng outside the box. This book does a great job in teaching you the basics of lending and explaining how you can retrieve the same returns that larger banks do. It is very easy to understand if you are someone that has zero background in banking and consumer lending.
However some of the information in the book is outdated due to the nature of this niche product quickly growing and evolving. I do not blame the authors because they cannot predict the future and control the changes.
Review by Gina Roberts-Grey for The Complete Idiot’s Guide to Person-to-Person Lending
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The author provided a clear and concise review of the topic. She delivers the info in easy-to-understand language and obviously did her homework. It’s so much clearer and informative than other personal finance books on the shelves.
Review by C. Arnold for The Complete Idiot’s Guide to Person-to-Person Lending
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This book is a must read for those who want to stay current on the emerging trends in finance today. Social Lending has been declared as one of the most socially innovative ideas in 2009 by Harvard Business Review.
I recommend this book to every consumer affected by this economic climate. Curtis and Beverly provide a wealth of wisdom in this Complete Idiot’s Guide.