Necessary requirements to apply for a loan in most entities.
Within the financial market there is an abundance of credit companies offering bank loans, personal loans, microcredits, etc. Given such diversity, it is not surprising that the documents needed to complete an application vary from company to company; but despite this, there are certain basic requirements that everyone must meet before applying for a loan, whether in a bank or an online platform.
The following is a list of requirements or documents to be considered when applying for a loan:
Personal and official identification
Loan companies, online or physical, request a personal identification document to obtain the applicant's basic information. This document must be up to date in order to generate more confidence in the companies that grant the loans, otherwise they may reject the application.
Invoice or proof of address
With this document, credit companies obtain more information about you, especially information related to your home address. You must make sure that your proof of address is updated in all the agencies where you are registered so that there are no inconsistencies and you will not be denied financing.
Some examples of these vouchers are:
Proof of income
This document is important because from it they will get more details of your economic capabilities and thus they will know if you are able to meet the repayment of the amount. Depending on the company you choose to apply for the loan, this proof of income can be based on a paycheck, social benefits, etc.
Regardless of whether you apply for personal loans from online companies or banks, you will always have to have a bank account to receive the amount. That account must be in your name. Keep in mind that sometimes you can have a bank account in one entity and apply for a loan in another without any problem.
Credit History
In the world of credit institutions, reputation is everything, which is why this document is so important. If you are in the habit of applying for personal loans, make sure you do not default on your payments so that your credit history is not affected.
What are crowdfunding loans?
Crowdfunding loans, are a crowdfunding model used to raise capital by taking loans from several investors (lenders) who expect to be repaid for their loan with interest added during the period the loan was used. The entire process takes place through a crowdfunding platform.
By eliminating many of the intermediaries that would be involved if the transaction were done through a bank, crowdfunding loans can keep costs low for borrowers while offering lenders better rates of return.
What are the advantages of loan crowdfunding?
Debt crowdfunding often offers better terms than traditional loans. For many borrowers, loans are approved faster than they would with a bank or online lender.
Standard SBA loans can take a few months to process, but crowdfunding loans can often take place in a matter of days. In addition, interest rates are often lower.
As with other forms of crowdfunding for small businesses, the loan crowdfunding application process gets your name out there, so it can help create some attention around your business and could build a community of support around you.
However, unlike other crowdfunding models, you don't have to share equity in your business with investors. This means they have less influence over the day-to-day management of your business.
As long as you pay back the interest on time and there is no fear that the loan capital is at risk, you can generally run your business as you see fit.
What are the risks involved in crowdfunding loans?
Just like any other loan, you will have to pay back the crowdfunded loan, at the agreed fixed interest rate and within the agreed time frame regardless of how your business is performing.
If your business is unable to repay the debts, you may be forced to sell your assets and close your business. If you have provided a personal guarantee for the loan, you could also be held liable for all or some of the debts your business has accumulated. Your assets could be at risk and your personal credit score could go down.
This is obviously applicable to almost all types of loans no matter what type of entity you have obtained them from.
RESUMING
Loan crowdfunding offers an alternative avenue to traditional bank loans. With this type of crowdfunding, you are responsible for paying back the money to the investors who funded your campaign or business, obviously, with interest.
Crowdfunding loans may have more favorable terms, lower interest rates and faster approval times than traditional loans, but the amount you can borrow may be limited and qualification requirements vary from platform to platform.
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