A flexible and versatile product
One of the most sought after and accessible forms of loans are personal loans. In most instances a personal loan is the one which does not force the user to use it for a specified purpose. This kind of loan has found a special place in the market because of their flexibility and benefits. There are several methods through which you can acquire a personal loan for yourself, including banks, credit card facilitators and private lenders.
In contrast to the past, nowadays it becomes a lot more convenient to acquire a loan. The online loan application and approval system have improved the whole procedure exponentially. However, the processing time depending on the type of loan may vary from person to person.
There is more than one type of personal loan
There are various forms of personal loans available in the market like secured, equity, unsecured, payday, and refinancing, etc. Although there is a broad horizon of what you can use a personal loan for, usually, we categorized them into only two categories, which includes secured and unsecured. The secured loans are the ones which are backed by some type of collateral security.
One of the most eminent examples of a personal loan is the home equity loan or line of credit. As the secured loans have an equivalent amount of secured equity on their back, the lenders do not hesitate in issuing such loans. Moreover, they would agree to much more lenient terms and conditions for the loan.
Unsecured loan advantages
However, that does not mean that all lenders would opt to offer a secured loan only, as many lenders promote unsecured loans as well. One of the key advantages associated with the issuance of unsecured loan is that it spares the lender a lengthy procedure of collateral evaluation and documentation. The borrowers especially adore the unsecured credit as they do not have to back it by their personal property. While the lenders on the other hand, are a bit more stringent about the terms of the loan as they have nothing to guarantee the return of their money other than your good character.
So, mostly the payback period for unsecured loans is usually shorter. Furthermore, as the lenders have nothing to back their loan amount with they will compensate themselves by asking a higher rate of interest from the borrowers. The most common example of unsecured loans is payday loans and credit card cash advances.
The qualifying requirements
To qualify for a personal loan, you have to submit your proof of income or employment record for at least the last three months. However, for many lenders the credit history of the borrowers has no impact on the loan approval criteria, nonetheless the lender is going ask for a higher interest rate if you do not have an outstanding track record regarding loans.
Personal loans can be used for almost anything
As already mentioned you can have a personal loan for anything legal including home renovation, appliance shopping, children’s educational fees, funeral costs or anything like that. Some forms of personal loans don’t even care if you have bad credit. However, you have to select a private loan after due consideration as there are various loopholes involved. You have to exert your efforts to study the market and then chose the lenders for your loan wisely.
A word of caution
Although a personal loan comes as a great help during hard times, you have to opt for a personal loan by considering the means of repayment in advance. We cannot stress the importance of knowing what you’re getting into in advance. Some personal loans, such as payday type loans can catch you in a never ending debt spiral if you don’t fully understand their terms and conditions.