A personal loan can be defined as a loan that can cover your personal expenses. It can be borrowed for a variety of purposes. You can use the amount of your personal loan to consolidate your debt. The expenses for home renovations and weddings can also be covered with personal loans.
Such loans can be offered by credit unions, banks, or other lenders. The amount borrowed is repaid with interest over a period of time specified by the bank. Some lenders might also charge a certain amount as fees for personal loans.
Types
You can either go for a secured or unsecured personal loan. In the case of a secured personal loan, some sort of collateral is required. Either cash assets or physical assets can be used as collateral. An unsecured personal loan doesn’t require any collateral.
Both secured and unsecured personal loans are offered by credit unions, banks, and other lenders. As there’s no collateral involved, banks consider unsecured loans as risky. The borrower, therefore, has to pay a higher rate of interest for an unsecured personal loan.
Process of getting a personal loan
In order to get a personal loan, you’ll first need to to a lender and apply for it. Generally, the process begins when you submit an application to the lender. It is then reviewed by the lender and a decision is made whether to deny or approve the application. Once your application is approved, you’ll be given the terms of the loan. You can either choose to accept these terms or reject them.
If you agree to the terms, the next step would be finalization of the paperwork. Once the necessary paperwork is done, the lender will release the loan amount. Normally, the amount is either directly deposited in your bank account. However, some lenders might also prefer to pay you the loan amount using a check.
Places to look for personal loans
Your credit union or your current bank is the first place to seek a personal loan. The choices in personal loans available would be offered to you. You’ll be given only those options for which you’re likely to qualify. Personal loans can also be found online.
Today, there are many lenders that offer personal loans online. You can apply for such loans electronically and know about their decision within minutes. In some cases, you can get the amount of your loan within 24 to 48 hours after it’s approved.
Requirements of the lender
Lenders can have different requirements for getting a personal loan approved. Borrowers can check the minimum requirements necessary for them to qualify for a personal loan. Among the basic requirements are income, credit score, and the acceptable debt-to-income ratio. You can also do your bit of research to get a loan that matches your financial and credit profile.
Comparing personal loans online
Today, there are several websites where you can compare personal loans online. You can go through the terms offered by different lenders and take informed decisions. While making the comparisons there are certain things that need to be considered. Some of them are the repayment terms, interest rate, fees and collateral requirements.