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What is a Spot Loan?
A spot loan has different meanings as used in different contexts. It refers to an alternative lending scheme where a loan is obtained online but with a higher interest rate. This term also refers to a lender that offers borrowers loans in installment with certain loan terms. Spot loans can be obtained by individuals for personal or business purposes. In real estate or mortgage, a spot loan is a mortgage loan issued to a borrower who wants to purchase a single unit of a building with multiple units. This type of loan often requires that the lender approves the entire building complex before a loan to purchase a single unit is issued to a borrower.
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How Does a Spot Loan Work?
As the name implies, spot loans are issued to individuals at the spot without any long or strict processes. These types of loans are often taken for unforeseen business or personal expenses. Spot loans can also be accessed online, lenders issue these loans within minutes of application. Spot loans are unsecured because no collateral is needed for the loan, rather, lenders process spot loans using the creditworthiness or credit history of borrowers. Aside from applying for a spot loan online, borrowers can also apply for such loans on their phone just by submitting their names, social security numbers, the purpose of the loan, income type, and others. Spot loans are disbursed automatically once the process is complete.
Spot Loans vs. FHA Spot Loans
Generally, spot loans are issued by private lenders through online medium, ATM or phone to eligible borrowers. The Federal Housing Administration (FHA) in the United States issues spot loans to borrowers who want to purchase single units in a multi-unit building or apartment. FHA loan program was effective in the U.S until a crash occurred in the real estate industry which incapacitated the program. As of 2016, the Department of Housing and Urban Development in the U.S started plans on starting a bigger FHA loan program for multifamily housing complexes. However, as at this time, nothing has been decided by the department.