What’s the difference between a bank guarantee and a letter of credit?

Both are promises from a financial institution that a borrower will be able to repay a debt. The bank guarantee is a more significant contractual obligation that protects both parties; letters of credit require certain criteria and are more commonly used internationally.

How do I get my name off a cosigned loan?

The best option is to have the person using the money refinance the loan without your name on it. You can also try improving the main borrower’s credit rating, paying off the loan faster, or closing the account to stop being a loan cosigner .

What’s the difference between a recourse and a non-recourse loan?

Both allow lenders to seize collateralized assets. If that doesn’t satisfy the debt, a recourse loan lets lenders go after the borrower’s other assets, while a non-recourse loan doesn’t permit that option.

Should you be careful about taking out a zero interest loan?

Yes, due to rigid monthly payment schedules, stiff penalties for not honoring zero-loan terms, and hard deadlines by which the entire balance must be repaid.

How does peer-to-peer lending work?

If it works out right, peer lenders get more interest than from many investments and peer borrowers pay lower interest than for many loans. These benefits come with greater risks and more work.

What are the legal protections against predatory lending?

Protective laws—both federal and state—can cap interest rates, ban discriminatory practices , and even outlaw some types of lending. But protection against predatory lending is a patchwork that differs depending on where you live.

Loans

Learn how to evaluate and get a loan, from the diff෴erent loan types to how to protect yourself from predatory lenders.

Loans 101

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Frequently Asked Questions

What’s the d﷽ifference between a bank gu🌠arantee and a letter of credit?

Both are promises from a financial institution that a borrower will be able to repay a debt. The bank guarantee is a more significant contractual obligation that protects both parties; 澳洲幸运5官方开奖结果体彩网:letters of credit require certain criteria and are more commonly usedꦛ internationally.

Learn More: Bank Guar🗹antee vs. Letter of Credit: What’s the Difference?
How do I get my name off a cosigned loan?

The best option is to have the person using the money refinance the loan without your name on it. You can also try improving the main borrower’s credit rating, paying off the loan faster, or closing the account to stop being a loan cosigner.

Learn More: Getting Your Name Off a Co-signed Loan
What’s the differe🌠nce between a recourse and a non-recourse loan?

Both allow lenders to seize collateralized assets. If that doesn’t satisfy the debt, a 澳洲幸运5官方开奖结果体彩网:recourse loan lets lenders go after the borrower’s other assets, while a 澳洲幸运5官方开奖结果体彩网:non-recourse loan doesn’t permit that option.

Learn More: Recourse vs. Non-Recourse Loan: What's 🧸th𒊎e Difference?
Should you be careful about taking out a zero interes🔯⭕t loan?

Yes, due to rigid monthly payment schedules, stiff penalties for not honoring zero-loan ♕terms, and hard deadlines by whi꧋ch the entire balance must be repaid.

Learn More: Zero Interest Loans: Why You Should Beware
How does peer-to-peer lending work?

If it works out right, peer lenders get more interest than from many investments and peer borrowers pay lower interest than for many loans. These benefits come🍨 with greater risks and more work.

Learn More: Peer-to-Peer Lending Breaks Down Financial Bor📖ders
What are the legal pro🍨tections against predatory lending?

Protective laws—both federal and state—can cap interest rates, ban discriminatory practices, and even outlaw some types of lending. But protection against 澳洲幸运5官方开奖结果体彩网:predatory lending is a patch♈work that differs depending on where you live.

Learn More: Predatory Lending Laws: What You Need To Know

Key Terms

Loan

A loan is when money is given to one party in exchange for repayment of the loan principal, pl🍸us interest. A loan may or may not be secured by coll🎀ateral and loan options and interest rates depend on the prospective borrower’s income, credit score, and debt levels.

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Financing

Financing is the process of funding business activities and making purchases or investments. The two types are equity financin🦂g and debt financing.

澳洲幸运5官方开奖结果体彩网:Learn More
Line of Credit

This preset borrowing limit provides funding a borrower can draw on at an⛎y time. Its main advantage is flexibility, and potential risks include high-interest rates, penalties for late payments, and the risk of overspending.

澳洲幸运5官方开奖结果体彩网:Learn More
Collateral

Collateral minimizes risks to lenders by providing an as▨set to act as security for a loan. Mortgages and🐼 car loans are two common types.

澳洲幸运5官方开奖结果体彩网:Learn More
Unsecured Loan

These loans are not secured by collateral and usually come with higher interest rates🌳. Most borrowers of unsecured loans need a higher credit ඣscore than for a collateralized loan.

澳洲幸运5官方开奖结果体彩网:Learn More
Bridge Loan

Used to “bridge” the gap until a person or company secures permanent financing or removes an obligation, these loans are often used in real estate. For example, a buyer can use one to purchase a new𒉰 home while waiting for their current home to sell.

澳洲幸运5官方开奖结果体彩网:Learn More
Term Loan

Established small businesses with sound financials may use these loans to provide cash according to specific termꦕs, with either a fixed or floating interest rate.

澳洲幸运5官方开奖结果体彩网:Learn More
Applicable Federal Rate (AFR)

This (there are 3 AFRs) is th𒈔e minimum interest rate that the Internal Revenue Service allows for short-, mid-, and long-term personal loans. Charging rates lower than the appropriate AFR may hꦰave tax consequences.

澳洲幸运5官方开奖结果体彩网:Learn More