As of 2015 November 1 New Responsible Lending Regulations have entered into force to limit and reduce excessive and reckless lending by the population.
Based on these new criteria, your borrowing amount will not exceed 40 percent of your regular monthly income. Nonetheless, creditors will need to verify the information – the customer’s solvency and ability to adjust to different interest rate hikes. In addition, there is a reservation for those who would be able to pay banks or credit unions up to 60 percent of their total income – they will be eligible for a home loan.
While the Responsible Borrowing Update is more focused on long-term loans, quick loans must also comply with certain terms of this amendment. The Board of the Bank wants to promote the position of the financially responsible citizen and to ensure transparency of creditors and market discipline.
There are six types of loans, but they are divided into short-term and long-term.
Short-term loans consist of:
Long-term loans are divided into:
In addition, there are two types of loans that can be classified as both long-term and short-term loans. It depends on the amount of the loan. Such loans include consumer credit and secured loan.
To determine which loan is best for you, you need to discuss the characteristics of long-term and short-term loans. Benefits of a long-term loan include a long repayment period and a large loan amount. Another great thing about your credit history. If your credit history is positive, you will most likely be offered better terms: reduced interest rates, more favorable solvency, and more flexibility in the repayment period.
These types of loans are usually used for business development, housing, weddings, studio payments. However, when choosing a long-term loan, you need to keep in mind that you usually sign a contract with a credit union or bank for several decades, so you need to assess whether you will be able to continue to owe and pay off the loan for another 20 years. Also, keep in mind that long-term loan payments will be constantly recorded in your credit history, so paying off on time will significantly lower your average creditworthiness, which is directly related to your financial awareness.
Finally, obtaining such a loan will take a long time in the documentation process, as you will be judged by several criteria.
Quick loans – the opposite of long-term loans discussed. The main and greatest benefit of this method of borrowing money is that you can get the right amount of money right here and now. It is not just a quick loan – it is issued within 15 minutes of completing a simple application form – it is a loan with extremely flexible repayment terms. In most cases, quick loans are taken for vacations, unexpected purchases, or bills in the event of an accident. If you are a responsibly borrowing client and you know there are only a few days left to pay, but money is needed now – this is a great way out.
Also, you don’t need to pledge your property or have a surety to get a quick loan. However, there is one downside to such a loan – the interest on such a loan is high, but if you are going to repay the borrowed money within a month, you will not feel the burden of the loan, as the first loan is often given without any interest.
Always evaluate your financial situation properly and borrow responsibly.