Loans personal can also be referred to as personal loans. What is a Loan? I am sure that most of you know what a loan is. If you do not, well here is the definition. According to Investopedia, a loan is any money property or material goods that is given to another party in exchange for future refunds. The refunds usually come with interest. There are different types of loans, so it is recommended you know the type of loan you are going for before applying. In this article, I would be explaining only the personal type of loan.
Loans Personal – Personal Loan
What is a personal loan? Well, a personal loan is a loan that you can qualify for based on the history of your credit and income. Sometimes, personal loans are referred to as signature loans or unsecured loans. This is usually because there is no collateral to secure the loan. The lenders evaluate your creditworthiness to approve or disapprove your loan. It may interest you to know that personal loans are quite easy to apply and qualify for when it’s compared to home or auto loans. You can use the money you get from this kind of loan for almost anything. Although you can borrow any amount, it is wise to borrow the amount you need.
How Personal Loans Work
Personal Loan work in a very straight forward way. When you get any personal loan, you would receive the money in a lump sum and repay it within the fixed time. This kind of loan is often repaid back monthly. You can also decide to pay back weekly. You should know that the details of the loan would vary depending on the lender.
Once again, the interest rate can either depend on the lender or credit. If you have excellent credit, you might just be able to borrow in the low single-digit. In another scenario where you have bad or thin credit, the interest rates may be similar to credit card rates and you may also need a co-signer for the loan to be approved. Now, there are different types of interest rates. These rates are fixed rates and variable rates.
Fixed rates are usually the most common type of loan. In this kind of loan, your interest rate does not change. This means you would make the same amount of payments monthly until you finish paying back the loan.
It may interest you to know that variable rates are available but not really popular. In this type of loan, the rate floats. You may likely end up paying less or more interest depending on if the rates will rise or fall.
This is another term in personal loans that people don’t often understand. Personal loans usually have a repayment time of over one to five years. You should also know that other terms are available. When compared to credit cards, personal loans can reduce the amount that you spend on interest and even provide a definite payoff date. In so many cases, you can end up paying off your loan early without any consequences. This is a great way to save you some interest costs.
It is not really common but some lenders charge an origination fee for personal loans. The origination fee is the amount you pay the lender upfront. Origination fee usually depends on the amount you want to borrow. The origination fee usually ranges from one to six percent. Like I said before, not all lenders request this fee. In fact, others build all the costs into interest.
How to Get Approved For Personal Loans
How do you really get approved for personal loans? Like I said before, lenders usually approve loans based on the evaluation of your creditworthiness. Here are some of the factors that would determine the approval of your loan.
These are the factors.
Types of Personal Loans
There are different types of personal loans that you can choose from if you ever decide to get this kind of loan. Here are the types of loans;
- Standard personal loans: Banks and credit unions usually have a long history of this kind of loan. You can either apply in person or apply online to get the loan to your account.
- Online Lenders: P2P (Peer to Peer) sites and marketplace lenders are can offer loans from investors and financial institutions. The application process for this kind of loan is often easy.
- Specialized lenders: some people who lend this kind of loan work directly with service providers. They might fund fertility treatment, dental work, or landscaping projects.
- Credit cards.
There they are.