Once someone qualifies for a loan, there’s still a few things that need to be done when getting a loan. Looking at the different loans, as well as the different processes of loans helps make a potential borrower a more educated one that understands what to expect once qualified for a loan from a lender.
When describing the different loans and different process in getting a loan, there’s usually three phases to expect:
- Information Distribution- Usually the longest part of getting a loan, and requires full communication and accuracy, as these things could impact every aspect of the loan (payment, installments, interest rates, etc.)
- Final Agreement- Whether a grace period or a time to finally agree on the loan, documentation and policies are usually at this point.
- Funding- Usually the transaction where a person gets the loan or gets the funding from the loan and will begin the process of paying back the loan.
Different loans and their different processes
When looking at the many different loans for a potential borrower, there comes different processes (of course), but let’s break it down to two loan types, and how their different processes typically occur when getting one!
As the name of the loan suggests, a secured loan is usually given to a borrower looking to make a major purchase that will likely take years to pay back. What makes them so secure is that a form of collateral is usually established. Things like home loans and auto loans usually come to mind when it comes to secured loans, although short-term examples include something like a car title loan.
In short, a secured loan must be paid back with interest, and the consequences of failing to pay off the loan usually ends up with the person losing their collateral to the lender.
As far as getting a loan, the secured loan process generally goes through these three phases:
- Paperwork and plenty of information must be filled out, as well as agreements and meet-ups with the lender. A house loan (mortgage) tends to have plenty of financial information that needs to be filled out by the borrower and verified through several people before a final agreement is signed.
- Depending on the secured loan, a final agreement is met and there may be a long duration before the loan is processed on their end.
- Once the loan has been agreed to, a secured loan for a house or a car is now the under the borrower’s possession (although technically owned by the lender), and the loan must be paid off in order to fully own the property or have the collateral under their name.
As any potential borrower could see, a secured loan is one of the more standard loans that is clear-cut and tends to have an easier process for those that are unfamiliar with getting a loan.
For those looking at getting a loan that does not have a collateral requirement, unsecured loans tend to be the answer. As far as what they are, unsecured loans usually rely on other aspects of a potential borrower’s qualifications, such as credit history, employment and other financial information.
Examples of unsecured loans include personal loans, bank loans, peer-to-peer lending loans, and a line of credit. Although the requirements for these tend to be more varied and restrictive, many of them follow a similar process.
- Once the application is filled and someone is considered qualified for a loan by the lender, filling out any other additional information could take less than a few business days.
- Once the contract of an unsecured loan is signed, funding distribution could take less than a few days or even weeks.
- Once funding for an unsecured loan has been given, payment could take less than a few days.
When looking at the different process of getting a loan, whether secured or unsecured, there is not a lot to expect. In fact, one could see the similarities from the different loans. Secured loans and unsecured loans expect communication from both parties and information to be filled out for a loan to be received.
One could also expect a good chunk of time to be had getting this information to the lender, and even take the time from that information distribution phase to ask questions to the lender.
When it comes to the last phase for both different processes, they tend to depend on the type of loan, as well as the type of lender. Time plays a huge factor on these differences, so never expect one loan to take the same amount of time as the other.
As for their differences, a major one seen in the different processes is how someone may be receiving a secured loan. The time and paperwork put down on a secured loan could be significantly larger, especially since collateral is involved in the loan. As for an unsecured loan, the paperwork and distribution would take a relatively shorter amount of time, especially since collateral is not involved!
Although secured and unsecured loans may have different processes, they tend to be more similar and don’t stray too far from each other.
What to expect when getting a loan?
In short, getting a loan from these different processes becomes easier with each new experience. Sure, the lender for a home loan may have been the longest one to get, but the three phases were clear and all that was done to get the loan made sense.
This would then mean that getting something like a car title loan or a type of personal loan would be easy, especially now with the experience received from dealing with the home loan process. When it comes to the different process of getting a loan, it’s not rocket science, and it gets easier with each loan!