Things You Need to Know When it Comes to Personal Loans
Every year millions and millions of people use personal loans to pay their debts or unexpected expenses, repair or make home improvements, buy cars, pay student loans, and many more. According to loan experts, people with personal loans have increased by at least ten to thirty percent all over the world.
In fact, personal loans are one of the fastest growing loan or credit products in the past years. The big question is why are personal loans very appealing to most people? Personal loans can offer the lowest interest rates among the types of loans for customers with positive or excellent credit scores.
What are personal loans? Click here to know more.
Personal loans are usually, a smaller amount of loans compared to other loan types like student loan or mortgages, but to some people, they are not necessarily the best solution to their problems. If you are planning to get a personal loan, here are some things you need to consider before you make an important decision.
How do personal loan works?
Personal loans are kind of instalment loan, and it means you can borrow a certain amount of money from banks or lending institution and pay it back with additional interest with scheduled monthly instalments throughout the loan. It ranges from 12 months to 84 months, depending on the amount of the loan.
The bigger the loan consumer avails, the bigger interest rates it will have, it will also have a longer loan period. Once you have paid the loaned amount in full, the account will be closed. If you need to loan more money, you need to apply for a new account. According to some loaning experts, it is very important to think about the reasons why you need a loan, and from there you can decide what kind of loan is more appropriate for your needs.
(Common question – How much money can consumers borrow? The amounts can vary depending on the lender, but usually, it ranges from 1,400 euros to 90,000 euros. The amount will depend on the borrower’s creditworthiness or how confident the lenders are that the borrowers can pay the loaned amount back. As what the Norwegian always says when it comes to personal loans the “beste-forbrukslån” or the best consumers can get the best loan options.)
Kinds of personal loans
There two kinds of personal loans available to consumers: unsecured and secured.
Secured loans are supported by a safety net called collateral like saving accounts or certificate of deposits or CD. If you are not able to pay the scheduled monthly payments, the bank or lending institution will have the right to seize your assets as a payment for the loaned amount.
Unsecured credits or loans are not supported by collateral. The lending company will decide whether you are qualified to borrow money based on your credit score or your financial history. If you are not eligible to get an unsecured credit loan or want much lower interest rates, most banks or lending companies can offer borrowers a secured option.
Where can you get a personal loan?
Banks are one of the most common places that come into mind when we think of acquiring a loan. But they are not the only place that can offer personal loans. Consumer finance companies, credit union, online lenders, lending companies, as well as peer-to-peer lenders can provide credit loans for qualified applicants.
Quick tip: A lot of internet lending companies have emerged in past years. If you are not sure whether the lending company is legitimate, you need to consider checking the Better Business Bureau or the Consumer Financial Protection Bureau.
Personal loans over other lending options
While all personal loans can provide the money that you need for different situations or reasons, personal loans may not be your best choice, but for the meantime, it is your best option. If you have a good credit score, you can qualify for a credit card balance transfer with 0% introductory APR or annual percentage rate. If you can pay the balance before the interest of the loan goes up, credit cards can be your best option.
Do you want to know more about APR or annual percentage rate, visit https://en.wikipedia.org/wiki/Annual_percentage_rate.
How can the balance transfer help the borrowers pay the debt? Be aware that if you can get a balance transfer card and you cannot pay the balance, or you are late for the payments before the rate expires, you can rack up hundreds, if not thousands of dollars in interest rates.
If you are a homeowner, you need to consider a line credit or a home equity loan or HEL/HELOC. This kind of loans can provide the financing the borrowers need for more substantial loan amounts with lower interest rates. While home equity loans are usually instalment loans, home equity line of credit is a type of revolving loan.
But, you need to be careful with this one, your house or car can become the collateral for this kind of accounts. If you can’t pay the loaned amount or you default your account, the bank or the lending company has the right to seize or foreclose your properties as a payment for the borrower’s loan.