Line of credit or credit card: the best options for small businesses.

When it comes to choosing the best loan option for your small business, it’s easy to feel caught off guard when it comes to terms and methods. At Lendifax, we want you to be knowledgeable about your borrowing transactions in order to find the option that works best for you and your business. In this article we look at the advantages and disadvantages of two borrowing options: line of credit and credit cards.

Line of credit

Line of credit

The line of credit is a flexible way to borrow and spend a pre-determined amount as you wish as long as you repay the amount spent.

Advantages:

Line of credit is a flexible way to buy what you need when you want it. Lines of credit have much lower interest rates than credit cards, especially if you opt for a secured line of credit, which offers you lower interest rates, lower monthly payments and greater limit on what you can buy compared to unsecured lines of credit. Lines of credit are especially useful in situations where you have recurring cash expenses and you do not know the exact amounts beforehand, such as home improvement projects.

The disadvantages:

Given the flexible nature of the line of credit, it is easy to get carried away with spending without thinking about the accumulating debt. More importantly, lines of credit do not offer grace periods or rewards like credit cards do. Lines of credit must be approved by the banks, which can take time without ensuring a satisfactory result. Interest rates also attach to the bank and vary with the bank’s key interest rate so, as interest rates rise or fall, so will the amount you have to repay.

 

Credit card

Credit card

Credit cards are payment cards with a pre-set limit that allows you to make purchases easily with a promise to refund.

Advantages:

Using a credit card is a great way to shop for what you need quickly. Credit cards are often accompanied by rewards programs and “extras” and allow cash advances when necessary. Credit cards are widely used and do not require the same approval process as that of lines of credit.

The disadvantages:

As with lines of credit, the convenience of the credit card makes the debt snowball effect more common, because it makes impulse buying easier. Credit cards impose fees on cash advances but more importantly, it is the fact that credit cards offer very high interest rates which can increase if the repayment is not made within the predetermined period of time. Spending on credit cards means that future income is used to pay for purchases made now and can result in losses if payments are not made on time.

 

What you must remember?

Credit loan

Lines of credit are very common among small business owners, while credit cards are more often used for personal purchases. However, both require a commitment to the bank and represent fewer freedoms in the future. Small business loans, such as those offered through Lendifax, offer an attractive alternative for small businesses. The advantage of a small business loan at Lendifax is that of a quick loan of a predetermined amount that will not change or fluctuate, making the future of your business more secure in the long term.

When is loan consolidation beneficial?

Consolidation is a different combination, and you can talk about credit consolidation in the financial industry. It involves the combination of several smaller loans into one larger. When does such a procedure pay off and who can benefit from consolidation?

 

Consolidation is a good option if the cost of the new loan is less than the sum of the costs of previously repaid loan obligations. Consolidation loans are designed to combine several loans into one and reduce and organize monthly installments. The bank grants a consolidation loan so that the customer can pay off earlier obligations:

  • cash loans,
  • car loans,
  • mortgage loans,
  • credit card limits,
  • limits on credit lines in a personal account,
  • installment loans,
  • mortgage loans.

Consolidation includes physical repayment by the bank that grants such credit of all previous liabilities. The consolidation loan may be granted as a mortgage loan, ie secured by a mortgage in the land and mortgage register, or as an unsecured cash loan. The mortgage is a solid security for the repayment of liabilities, which is why its establishment means that the bank will be willing to grant a loan with a lower interest rate compared to an unsecured cash loan.

 

Who is consolidation for?

Who is consolidation for?

 

Not every borrower will be able to use the consolidation mechanism. It will not be available to those borrowers who already have some delay in paying their credit obligations. You can’t equate consolidation loans with debt loans. To obtain a positive credit decision when applying for a consolidation loan, you should also have sufficient creditworthiness, understood as the ability to repay a new liability.

 

Is it worth it?

Is it worth it?

 

If the borrower has several loans and the specter of losing financial liquidity hangs over him, a consolidation loan may be the only right solution. Thanks to it, the remaining loans will be repaid and the new debt spread over a longer period, which means that installments will be lower.

 

Consolidation is a great procedure when the customer has expensive cash or car loans granted under conditions of higher interest rates in the country. Then the consolidation loan can reduce the total cost of the liability. It is always good to calculate the costs of a new loan and any fees associated with repayment of existing loans and loans before signing the loan agreement, and then confront them with the financial benefits that can be obtained.

The most common types of hard money loans

To understand where hard money loans came from, we can go back to the horse and buggy days. The most common form of money used by settlers in early America was gold coins. Native Americans, on the other hand, traded goods like pearls and furs.

When you borrowed money, you were expected to pay it back and collateral was not always part of the deal. Cash loans are usually unsecured. On the other hand, if you haven’t paid for it, you can be shot.

In order to settle the colonies, the US government gave land away in exchange for a promise by the settlers to live in the country, growing things like corn or cotton, and raising cattle. Provide shelter, chopped settlers cut down a few trees and built their own log cabins.

Today we expect to buy an existing house or we pay a builder to build a new home for us, and we rarely own a house clear and clear. For the most part, some form of financing involves buying a house in the 21st century. There are generally three parts to the purchase price:

  • Serious deposit
  • Total down payment from the buyer (which includes the serious deposit)
  • Residual purchase price in the form of a mortgage loan

 

Hard Money Loans Versus Purchase Money Loans

Hard Money Loans Versus Purchase Money Loans

A buying money loan is money a home buyer borrows to buy a house. The house can be almost any type of structure, from a single family home, multiple units, to a condominium, townhome, or share cooperatively to a modular or manufactured home.

Purchase money makes up part of the purchase price. The loan is secured by the property, which means that when buyers stop making payments, lenders have the right to sell the house and get their money back home.

A hard money loan to secured real estate is a loan that money won’t buy. It is money lent to a borrower that is not always used to buy a house. You can get a hard money loan without even owning a home – with no security for the loan – providing the lender feels like a good credit risk.

A credit card cash advance is a hard money loan. Or you can get a hard money loan that is guaranteed justice at home but was not part of the original purchase price. Hard money lenders usually want the borrower and security to qualify for a hard money loan.

 

Loan sharks are hard money lenders

Loan sharks are hard money lenders

People who generally borrow money from loan sharks cannot get a loan from another source. These borrowers could have bad credit, no assets, or questionable professions. Some borrowers are simply naive and fell for hard times.

If you have an asset that can be used as collateral for the loan, you can go to a pawnshop. If you have no element of value for money, a hard money lender like a loan shark trade is the lender of choice. Loan sharks earn their money by charging very high interest rates that are common against usury laws. Credit sharks could use threats of violence to encourage borrowers to repay the debt.

All loan sharks are hard money lenders, but luckily not all hard money lenders are loan sharks. It is not advisable to borrow money from a loan shark.

 

Types of hard money loans

Types of hard money loans

Most time depositors prefer to use collateral with securitizations to make a loan. Security like a house returns to the hard money lender when the borrower and the house finally go to foreclosure.

Real estate is an excellent vehicle to secure a hard money loan that provides real estate in question equity. One of the reasons for the mortgage crisis in 2007 was the fall in the value of homes that without a certainty many lenders keep their pockets out of.

Some buyers use hard money loans as a routine financial investment property that need to be fixed. You will save your money and pay high points with a short term take out a hard money loan.

The problem with this approach is that some buyers write their purchase like all cash offers, and they show cash accounts as proof of funds. If they get a loan, however, the transaction will not be all cash.

 

Common types of hard money loans

money loans

  • Mortgage refinancing is a hard money loan. A refinancing pays off from one or more lending secured to the property that results in a new loan, usually with a larger principal. A homeowner can refinance without paying through any of the proceeds that either roll the cost of the new loan into the principal or the cost of the loan out of the borrower’s pocket.
    • With a cash out refinance, the buyer takes out a new loan that is larger than the amount of old loans plus the cost of getting the money. The money through these two elements is called “cash for the borrower”. It is the net proceeds from the refinancing. Many cash-out refinances are subject to shortage judgments.
  • Equity loans are hard money loans. Home equity loan fund is relatively quick and is subordinate to an existing first mortgage. In other words, an equity loan falls into the second or third position. Borrowers cannot get a home equity loan in all 50 states.
  • Bridging loans are hard money loans. Bridging loans are used by sellers who want to buy a new house before selling an existing house, but need the money from their home. You will see bridging loans used more often in seller markets than in buyer markets.