From Struggling to Success

Consumer financing comes in many different options, all of which are designed to help you get services and products you need for your home or business. It is important to understand the options available so that you make the best choice for you. Having this extra money when you need it, be it for an emergency or a more long-term plan, helps you to take better control of your finances.

Working Capital Loans

Working capital loans are provided by some financial institutions and they are largely based on business profits instead of your credit score. These loans have a fixed maximum amount, which varies depending on the institution, and the repayment is different than a traditional loan. With a traditional loan, you usually make monthly payments. With this option, the payments are generally not fixed and based on your sales. For example, you might choose to pay the loan back at 20 percent of your sales and the payments may come out more frequently than once a month. These tend to not have interest either, but instead a fixed fee added to the total loan amount.

Traditional Bank Loans

Whether you need extra cash for a business or personal reasons, you can take to a loan officer at your bank. This consumer financing option tends to be the most strict in terms of who qualifies, so be aware of this. You will want a good credit score and make sure that your finances are in order before you apply. The bank will often ask about what you are using the money for, so be prepared to have a plan before you head into the bank. You will likely need to bring identity documents, financial statements going back six to 12 months, and if you are seeking a business loan, a business plan for how the money is going to be used.

Peer-Based Financing

This type of financing is given to you by actual people and not a financial institution. There are websites for this type of financing and each has different rules and guidelines. The basic premise is that you put up a listing stating why you need the financing and how much you need. People can choose to contribute to your business or personal financing need and repayment terms are based on the website terms.

As you can see, there are several consumer financing types you might choose from. Think about your specific needs and credit score to determine which one will be the most beneficial.

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