Presently, you consider yourself as someone who is content with life. You have a stable job with a career that you want, you can pay all of your monthly bills with a little extra every month, and you get to hang out with your friends once in awhile. You think that you’re financially healthy because you get to pay all of your needs while spending a little on your wants. Sure, this might be your scenario right now but with this kind of lifestyle, how can you finance emergencies which will happen in the future? How can you start your own business when you only have “just enough” income? How can you start planning your wedding when only a little amount goes to your savings? Answering these questions might frighten you because obviously, you’re not financially prepared for any of that. But all of these can be resolved once you apply for personal loans. You might be hearing information about personal loans from other people but have you realized the wonders this can bring to your life?
But First, What Is A Personal Loan?
In a simpler sense, a personal loan is a type of an unsecured loan which helps you meet your financial needs. It’s considered as unsecured because the process doesn’t require you to provide any collateral before you can avail it. Many people have considered personal loans as the perfect solution whenever they’d need fast cash for emergencies. Unlike other types of loans, personal loans usually don’t require too many documents and rigorous background checking – which is probably the reason why many people have sought after this loan rather than applying to other types of loans. It’s very easy to acquire money from personal loans.
What Are The Things You Should Know About Your Loan?
Since you’re reading this part of the article, it’s safe to assume that you now have a background of what is a personal loan. Your idea about personal loans might not be that well-defined but don’t fret, the list below will help you create a clearer picture of what is a personal loan:
- Personal loans are unsecured: As mentioned in this article, personal loans are unsecured type of loans which means that no collateral is involved. Similarly, if you can no longer fulfill your responsibility as a borrower, the lender don’t have any rights to take away your car or properties as a payment for your existing loans. Yes, no collateral might mean an easier application for you but you shouldn’t be too complacent with this notion. Lenders can still report your irresponsibility to pay to the credit bureaus, and all of these can have adverse effects to your credit scores in the long run
- Personal loans don’t have any fixed amount: Contrary to popular belief, personal loans are granted in different amounts. The amount can range from $1,000-$50,000 and this will depend on the lender, your credit standing and monthly income. For example, if the lender has seen the long list of pending loans you have in your credit profile, you can never expect that the lender will grant you a high amount for your personal loan. The lender might even become hesitant in granting you any amount and worse, might disapprove your loan application.
- Personal loans usually have a fixed interest rate: Once you agreed upon an interest rate, you are expected to pay that during the life of the loan. You can’t just barge in in your lender’s office the moment you experience shortage with your monthly income and ask him to make adjustments for you – that doesn’t happen. Once you decide to apply for a personal loan, it’s also tantamount to saying that you’re ready to take on the responsibility of being a borrower. And one of those responsibilities is for you to make on-time payments.
- Personal loans can affect your credit score: If you are too tired of phone calls and letters because your overdue bill is sold from the original creditor, you ought to remove collections from credit report, and you know that affects your credit score, right? Thus, you should also be ready for your personal loans, for it might not require too much from you but your transaction with any lender or credit company will affect your credit score too. Whether this effects are in a negative or positive way? Everything is based on your performance during the life of the loan. For instance, if you were able to pay your loan within the given time frame or even earlier, you can expect that your credit score will increase. This shows that you know how to manage your finances. Thus, it is suggested
- Personal loans can help you become financially healthy and responsible: One of the most common uses for personal loans is for debt consolidation. Many people would apply for a personal loan to get rid of their existing, overdue credits. They would also use personal loans for one-time big expense such as weddings or family vacations. Regardless of what reason you’re planning to use personal loans, one thing is for sure – it’ll teach you to become financially healthy and responsible. You’ll become financially healthy once you get to pay off any existing credits and you become responsible as you’re now being careful on how you’re going to spend this money.
- Personal loan lenders are the same: You can apply for personal loans through different institutions. You can get personal loans from direct banks, from peer-to-peer lenders and even from traditional banks. With these choices available to you, you have to take the time to assess which among these institutions might give you the best deal when it comes to your personal loans. These institutions have different paying terms, interest rates and might even have unique options to give you as a borrower so consider which among these can be suitable for your financial needs and capacity. Don’t immediately decide to do business with one lender just because it’s accessible from your location or because most of your friends recommended doing so.
The information presented in this article allowed you to have a deeper understanding of the entire process of personal loans. You’re now aware of what will be expected from you as a borrower before, during and after the entire personal loan process. This information will help you to have a smooth and fast transaction with any lender once you decide to acquire a personal loan in the future.