What’s a Government Loan and How Does it Work? Benefits and Solutions
Taking a loan is not available for anyone. Because of the requirements, many people are left aside. Luckily, there are other options for those who don’t comply with some of the requests. One of the best alternatives offered comes from the government. If you’ve heard about it but, you don’t exactly know what’s a Government Loan, this article will be helpful because I’ll expand on how it works and the benefits of it. Also, I’ll refer to other solutions you can keep in mind in case you aren’t eligible for this type of loan.
What type of loan can be called Government Loan?
In order to expand on Government Loans, I must start by explaining briefly how a loan works. When borrowers take a loan, they must pay for the service. This is done through the interest rate and fees – Initiation or Service Fee, for instance-. That’s the way lenders make money and, the business can go on. The problem may arise when the rate charged is too high, making almost impossible for applicants to cope up with payments. As we all know, loans may be used for paying holidays, purchasing a house or a car but, no matter the purpose of it, it seems unfair that some citizens can enjoy this advantage but, others can`t. That’s when Government Loans comes to the rescue.
This type of loan is issued by the government at lower rates and it’s thought to help low income citizens or, currently unemployed for instance. We can mention many benefits of Government Loans:
The Interest applied is subsidized and fixed.
Credit checks are not part of the approval process.
Deferred payments are allowed, which means, you can get the money today and, agree to start repaying it in a few months, instead of on your next payday.
Repayment plans are based on the applicant’s income.
There are no penalties in case you want to make a pre-payment.
Besides, there’s an interest point in which a part of the payment of the loan may be forgiven providing the applicant goes for public services.
How does a Government loan work?
You are probably wondering how it is possible to offer low rates so; I’ll go over how a government loan functions. As the government subsidizes these loans, lenders are protected in case borrowers fail to repay the loan. Consequently, lenders find it easy to lower their interest rate. In this way, there’s a win-win situation in which both parties can get what they want. A significant detail to highlight is that this loan’s main purpose is to help lower income citizens achieve their goals, whether they need to become home-owners or, they need to get transportation.
Besides, this is why Government Loan may also be known as government guaranteed loans. In some way, the Government works as guarantee to the lender, making it easier for them and the borrower to complete the transaction.
Can anyone get a Government Loan?
Clearly, with this type of loan, the borrower can get better rates and more attractive terms so, as you can imagine, it’s not that simple to acquire a Government loan because of the large demand. The criterion to select the applicants is demanding and, what’s more, the application procedure is also long and wearing. All in all, because of the many benefits this loan offers and, the great help it represents, they need to make sure the applicant is on financial needs before issuing a Government Loan.
Next, I’ll provide you with a short list of some sectors in which you can find government loans:
1) Housing and Urban.
4) Business and Industry.
5) Farm, Agriculture and Rural Service.
Remember, the sectors may differ depending on the area you live in but, in general these are the one you may find around the globe.
Up to now, a Government loan sounds like the perfect solution but, what if you can’t wait for the whole approval and application process to finish or, what’s worse, they don’t consider you are a qualified candidate? In that case, I’ll talk about other choices you have:
If your problem is you don’t qualify for a Private Loan, you may consider Peer to Peer Lending. For this kind of loan you must enter a Peer to Peer Lending Site in which you’ll find many investors willing to assist you. As they don’t work with private lending companies, it’s possible for investors to offer lower rates to low income workers. P2P Lending is a great chance to get the economic assistance you need if your income is not high enough for a private loan but, not low enough to qualify for a Government loan either.
You may also consider looking for a lending company that accepts a valuable as guarantee. As long as you present an object you own as collateral, the bank will issue the loan. They’ll keep the object stored until your loan is fully cancelled and then, you can go home with it and, go on with your life. In this case, as the object serves as security, work and income requirements are usually simpler.
Finally, there are plenty of entities offering payday loans, which will give you a hand in times of desperation. These are done to provide the applicant with a small sum of money quick through a bank transaction. This alternative is the perfect one if you just need a little money immediately. Instead of waiting for the long process of approval ordinary loans request, you apply for a payday loan and that’s it. Bear in mind, they are paid over a short period which can go to 30 days up to 6 months in some specific cases.
Companies to work with: An excellent P2P platform is PeerFin. Cash Converters will accept almost any item of value as guarantee and, Wonga Loans offers payday loans with up to 6 months payments.
On the whole, if you think you can be considered as someone who really needs a Government Loan, you should try to apply for it. The terms and rates will make the difference in your monthly income. However, it’s important you know there are other viable alternatives to get support financially.
Questions and answers
What’s the most significant difference between government loans and private loans?
The most important difference between government and private loans is the interest charged. Government loans offer lower rates than private loans.
Is it a good idea to get a student government loan?
If you are taking a student loan, your best choice is a government loan. One of the benefits is that if you decide to work in the public service once you get your degree, a part of your payment can be forgiven.
How much can I borrow for a payday loan?
They tend to borrow around 8000 rands but, quote may vary according to the company.
I’ll try to get a government loan to buy my house.
Government loans are of great help, though they’re not that simple to get.
I’ll go for it, thanks!