Andrea is a young single mother of two and is facing a number of financial difficulties. Her salary isn’t increasing at a rate that is fast enough to keep up with the rising cost of living and she has found herself facing a dilemma. She has a medical emergency which she has to finance or else it could leave her children without a parent. The realities that she is dealing with are that she has not established an emergency fund yet and is also putting her younger sibling through school. She has quite a number of financial responsibilities and does not think that she could turn to family members or friends for a loan. She is considering applying for a loan from her bank, but is not sure which one will be ideal for her needs.
Fortunately for Andrea, banks have a wide array of loans and advances which are designed to meet different needs.
This is a fluctuating account and is only allowed for individuals who own a current account. A customer with access to this facility can draw over and above their balance, up to a stipulated limit. The total amount overdrawn cannot exceed the agreed limit however.
Short Term Loan
The full loan amount is paid to the debtor at one time. Repayment may be by instalment or it can be at the end of the month when the borrower’s salary is paid into their account.
This type of loan is granted for a fixed period of time and is typically for more than three years. It’s repaid in instalments and is usually granted for fixed capital requirements.
A customer can advance money up to a certain limit against an asset that is pledged.
Andrea needs to compare loan offers and decide which one she would be able to afford, taking into account origination fees, interest rates charged and her creditworthiness and affordability. She can speak to a consultant about the various loans and advances at a bank and select the right one for her.