First, what exactly is a loan. A loan is a form of debt that provides a set amount of money, borrowed by an individual or a company. It is designed to be repaid in regular installments with interest. It is different from credit which can be repeatedly borrowed against. A loan is a one way trip. Once you pay it off, you can not borrow against the original loan amount.
Different Ways To Get A Loan
There are many ways to get a personal loan, but they can all be classified into two categories: the traditional way and the online way.
The traditional way is applying for a loan through banks or other financial institutions. You will do so in person and typically fill out a paper application.
The online way is getting a loan from websites that specialize in online lending.This is becoming an increasingly popular approach as consumers seek the path of least resistance, or the easiest way to get things done. Lenders are also increasingly turning to online markets due to the lack of overhead needed.
In short, online loans are easier for consumers and more profitable for lenders.
Getting A Free Loan
Now for the question at hand. Is it really possible to get a loan without fees? Yes and no. Let’s look at truly free loans and essentially free loans.
Truly Free Loan
No company that is in the market to make money will give you a free loan. This is just a business model that will never work for a lender. This is not to say that you can not get a truly free loan however, you just need to turn to your friends and family.
It can be difficult to borrow money from your family and friends. Doing so means that you have to reveal something about your current financial state. Additionally, friends and family are often leery about being taken advantage of. Money and family is a strange mix and combining the two can cause some issues.
Still, if you want a free loan, you need to consider this source.
The trick to a successful friend and family loan is documentation. You need to get everything in writing so that there is no confusion. What this means is a loan contract. In it, you should include how much is being borrowed, how much is being paid back and the timeline for repayment. All of these details need to be spelled out so that everyone knows their obligations.
Do all of this and you can have a successful friend and family loan.
Essentially Free Loan
If the family thing does not work for you and you still want a free loan, you need to look at essentially free loans. These are loans that are free on the surface, but come with some strings.
The simplest form of this is an interest free credit card. Credit card companies issue these in hopes of luring in borrowers. They will often have a 6, 12 or even an 18 month period where there is no interest. This essentially makes the credit card a free loan. The catch is that they want you to carry the balance beyond the interest free period.
If you go the interest free credit card route, you need to make sure that you pay off your balance before interest starts being charged. Do so and you have a free loan. Fail to do so and you have fallen for the credit card companies trap.
Loans From An App
Another essentially free loan is one from an app. There are numerous free apps such as Brigit that claim to give you a free loan, but there is a catch. They ask for a tip at the end.
The good thing about these services is that you actually can get a free loan, all that you have to do is not tip at the end. The bad is that these loans are usually lower dollar, with most being under 250 dollars. Additionally, if you continually do not tip, you will lose access to money.
Also, if you decide to tip, you should be careful about the amount. Due to the short terms of these loans, the suggested tip is often in line with what a payday loan charges.
Getting A Free Business Loan
Getting a business loan is not an easy task. There are many institutions and private lenders that offer loans to start or grow a business. If you are looking for a loan to start or grow your business, here are some tips to get you started.
Apply for a loan at the right time. You’ll have better chances of getting approved if you apply when your company is doing well financially.
Demonstrate that your company can be profitable in the future with the help of financial statements and projections.
Take care of all your paperwork in time and make sure that it’s all ready before applying for a loan.
What About A Free Loan?
As far as business goes, nothing is free. If you are looking for a free business loan, there will be a catch, usually in the form of partial ownership in the company.
An investor may be willing to contribute capital for the growth of your company, but they will want a stake in the ownership in exchange. The good thing about this arrangement is that you will not have a loan payment to make. The obvious negative aspect however is that you would lose full ownership of your company.
