The history of lending can be traced back to around 2000 BC when merchants would give out grain loans to traders/ farmers in Babylonia and Assyria. The grains would then be paid back during the harvesting season. Later, some changes were introduced by the Roman law where borrowers were required to sign off ownership of their property but they would later regain full ownership after clearing their debts.
Establishment of bank loans
The idea of money lending was started by Italians who would set up stalls in various local markets and then use them as lending spots. The lenders would then sit on benches that were locally known as “banca” and this is where the word bank came from. At the time, there were no laws or rules controlling the lending process and the loan terms would greatly vary from one lender to the other.
The banking industry has undergone significant changes since then and the services offered are now centrally controlled to protect the interest of consumers. Some of the common services being offered today include saving, financing and insurance. Apart from banks, borrowers can also access credit financing from private lenders, credit unions and government sponsored programs.
Secured and unsecured loans
In secured loans, an applicant is supposed to pledge some valuable property as collateral and this is meant to protect the lender in cases of missed payments or defaulting. You can pledge assets like your house, car or business assets. There are benefits associated with secured offers including:
- Obtaining huge financing with ease
- Qualifying for reduced interest rates
- Flexible repayment plan
There are also lenders who offer unsecured loans where applications are considered without the need to pledge collateral. Borrowers usually rely on unsecured offers for short term financial problems since they carry smaller amounts. Unsecured loans have some common features like quick processing, higher interest rates and shorter repayment periods.
As a way of bringing financing closer to consumers, lenders are now offering lending services online and this is a move that has been adopted even by banking institutions. The online application process is pretty convenient since it involves completion of a simple electronic form. The applicant is then provided with quotes after an automated matching process that takes just a couple of minutes.
Borrowers using the online process are required to have checking accounts to facilitate wire transfer of approved funds. In some cases, the lenders may request for additional details or documents before releasing the required financing. Most online applications are processed pretty fast making it possible to conveniently handle even emergency situations like medical bills and quick auto repairs.
Bad credit and no history loans
The needs of persons with low credit standings are now well catered for in the modern lending sector and there are numerous programs that they can qualify for. This is also the same case with people with no credit history. However, bad credit or no credit loans are availed at higher interest rates especially where no security is required. They also carry smaller amounts and shorter repayment periods.