Lending companies are financial organizations that give loans to individuals and businesses. Loans are what allow families to obtain housing without having enough money to purchase a home in full. Loans are also what allow businesses to take a risk by entering new markets. Without lending, the economy simply wouldn’t work. Below are six significant benefits lending companies provide to borrowers.
1. They Can Help You Start a Small Business
There are lending companies that primarily lend to small businesses to help them get up off the ground. Sometimes banks deny new businesses loans due to the credit risks involved. However, lending companies often have much more relaxed credit limits. In exchange for the relaxed limits, high interest rates may be charged. Still, many businesses can benefit from obtaining this kind of financing when they’re just starting out.
2. They Can Provide Longer Loan Terms
Banks and other lending institutions are regulated by state and federal government regulations. However, lending companies are free of many of these restrictions. They may, for example, be able to grant a wider range of different loan terms. The term is the length of the loan and determines how high payments will be. The longer the term, the smaller the monthly payment will be. This can help individuals and businesses that have less free money to spend on higher loan payments.
3. Loans Are Preferable to Making Purchases on Credit
In almost all cases, obtaining a loan is preferable to racking up credit card debt. According to Bankrate, the interest rates for credit cards tend to be much higher than the interest rates paid by those who receive loans. Credit card interest rates, for example, can be as much as 10 percent higher than the interest rates paid by those with a mortgage.
4. Loans Can Allow Regular People to Make Big Purchases
Loans are one of the only ways the middle class can make large expensive purchases.According to USA Today, the average new car costs over $33,000. If a person only makes $30,000 a year, it will be quite doubtful they will ever actually have $33,000 on hand to purchase a new car in full. However, loans that are paid over a series of years make these kinds of purchases possible for the average consumer.
5. Loans Are Temporary
Another great benefit of implementing a loan from a lending company is the fact that the financial obligation is temporary. At some point in the future, the loan will be satisfied and the borrower will be completely free of the financial arrangement. This is not always the case for other kinds of financing. A business that takes on investors, for example, may never be free of their influence unless they convince those individuals to sell their ownership stakes.