What is a Personal Loan?
Personal loans are widely available and easy to access. Most people wonder what these personal loan funds can be used for. The best part of personal loans is that these funds can be used anywhere. From paying bills, gas for a car, home repairs or family emergencies, personal loans can help. Sometimes when financial woes hit hard a personal loan can help get temporary relief
Personal loans can also be used to pay off multiple smaller balance credit cards. You can think of a personal loan as cash since it can be used anywhere once a check or direct deposit is released. Paying back a personal is sometimes much easier than credit card balances. Payment periods vary but, on most occasions, payments can be made in a span of 2 to 5 years. Interest rates vary and can range from 5% to 35% based on lender, payment time frame and credit score. Payments are generally set monthly and if more than the minimum payment is made the fast the loan can be paid off.
In most cases personal loans are considered unsecured loans. Unsecured loans do not require you to place any collateral when applying and receiving the loan. Therefore, no need for assets is necessary and loan approval is based on good credit standing.
In contrast, a secured loan requires some kind of asset to be places as collateral in case the loan is not paid. This collateral or asset my be a house, car or other comparable value assets. These assets help lenders recoup their lending amount if the loan is not paid or a customer defaults on payments. If repayment of a loan is conceivable, an unsecured loan would be the best way to go.
Personal loan rates vary but usually they are better and lower than credit card rates. Personal loans can offer a higher approval limit and payments are lower than credit card monthly payments. Rates vary but if your credit score is in good standing rates will be lower and loan limit will be higher.
Approval for personal loans is also easier when credit scores are better. However, you do not need to have a great credit score to be approved and get a good rate. These rates fluctuate and there are better times than other to get approval for better rates. Researching different lenders can help get better rates and lower monthly repayment amounts.
When deciding on a personal loan, making sure you are able to repay the monthly amount is essential. If payments are not made on time or not at all your credit score and drop and your credit history will note these late payments and skipped payments. Therefore, making it harder to get approval for another personal loan later or other loans such are car or auto loans, home or mortgage loans, credit cards and many other denials from credit companies. Make sure the payment amount fits in your budget in order to ensure your credit continues to be in good standing and that a personal loan is helpful to future financial standing.