What Is a Personal Loan?
One of the most common options to borrow money is via credit cards, that most people are aware of. It is a procedure to access a sum of money, whenever needed and then you can return back the debt by paying the minimum amount each month. The rate of interest as per the bank norms keeps on changing from time to time.
On the contrary, personal loans are different. It is that some of an installment, that you borrow from a
lender or a bank that needs to be paid off over a fixed period of time through monthly installments. The time duration lies anywhere between 2 to 5 years, it can also be as least as one year or as long as seven years. In this case scenario, the interest rate remains fixed and it doesn’t change over time.
Sources of Personal Loans
There are many places where you can fetch a personal loan. There are many online lenders available. The most convenient is the P2P lenders, but make sure that it is available in your state or the desired location.
The most important part of getting a personal loan successfully is to look after your finances before any lender approves of your application. Any Bangalore the lender well proofread the credit history that you have shared with all the personal details and your credit score, the debt to income ratio. The better your credit history is, you will be more likely to gain a loan and so would your interest rate will increase.
Pros of Personal Loans
Personal loans are always a good idea. So if you wish to borrow one, make sure that you know all the advantages that it shall bring along. Have a look!
* They Have Many Uses: Did you know many of these loans are multifunctional? The other loan type such as auto loans, mortgages, student loans, etc. are used for a predefined purpose whereas personal loans can be used in any way you want it to be.
* You Don’t Need Collateral: If you are aware, most of these personal loans do not require any kind of collateral. However, this makes an ideal choice to choose as people know what they are borrowing against.
* You Can Borrow Any Amount. Typical amounts for a personal loan range from $1,500 to $100,000. That means you can borrow a lot more with this type of loan than you could with a credit card, yet you can also use one if you only need a relatively small amount.
* Rates Are Reasonable: One of the best advantages that personal loan offers is cheaper card borrowing as compared to the credit cards. All you need is a good credit score and you’re good to go even the other lowest interest rate of say 5%. On the contrary, credit cards usually charge 13% to their customers.
* You Don’t Need Great Credit: There are times when you don’t need a great credit history. There are some lenders in the market that are willing to offer these loan types to the customers where the credit score of 600 or even lower. However, it is one of the most common options for this prime borrowers you have to pay the higher interest rates as their ideal situation.
* You Have Plenty of Time to Pay: One of the biggest banes of the day loans is that you only get a few weeks to pay the full amount in return. Most of the borrowers were cash-strapped are unable to afford this type of loan and therefore, the debt circle starts over. Personal loan gets you a year to pay at least the debt amount. Once done, it breaks off the amount into small installments that can be paid on a monthly basis easily.
Cons of Personal Loans
Despite personal loan has tons of benefits, it is always convenient to look for the other side of the coin. We have created a list of few drawbacks. Have a look!
* Fixed Payments. In credit cards, whenever you borrow a sum of cash, you can pay that accordingly. Whereas, a personal loan has a set of fixed payment that is decided prior. It is essential to meet all the requirements such that there is no hassle in getting a personal loan. The lender can seize your collateral and may either sue you in the worst-case scenario. If you don’t need the requisite that is well established.
* Higher Rates Than Some Loans: For the people like us who have a good credit history, personal loans are an ideal situation as they offer a low interest rate compared to the credit cards. But for the borrowers who have a bad credit history, Personal loan can be expensive on the pocket. For example; the home equity loan.
* Origination Fees: The lender will let you know what is the origination sees that comes along with the personal loans at the time of loan processing. The fees usually range from 1 to 6%. One needs to pay that amount on the loan as a part of the monthly payment.
* Prepayment Penalties: When you take money through credit card, one can easily avoid the interest-rate bye by paying off the entire sum As soon as possible. If you are aware of the fact that most of the banks charge of penalty on the pre-payment so that they are making up for the interest-rate.
* Potential for Scams: It can be treated as one of the final risks that are involved in taking unsecured loans. There are a dozen of scammers that are present in this industry that fakes about taking personal loans applications and take away all your personal information. However, this helps in stealing your identity. Did you know? Many of these also charge a fee, stating that your loan will be sanctioned only when you pay the advance fees.
Final Word
It is one of the most convenient ways to borrow money. Those who have a good credit history can easily get a personal loan.
Still, having any doubts? Don’t forget to share your comments down below.
