What is personal loan

By definition, we can say these are unsecured loans which tend to have fixed interest rates, fixed amounts and fixed repayment periods. Personal loans can also be termed as consumer loans granted for personal needs like medical, family affairs, households or any other personal need. Mostly, they are unsecured; some lenders will, however, require you to have an asset, a guarantor or a cosigner. To get unsecured loans, banks or lenders tend to look at the borrower’s credibility history and the ability to repay loans. In most cases, personal loans come with flexible repayment terms that can be either in installments or one of payments. To get a personal loan, you need to consult your bank or look for lenders; you might also consider checking lenders online. However, we advise you to enquire about all charges that will be incurred once you apply for a personal loan. It’s also good to understand that personal loans highly affect your credit score, you thus need to honor them and repay within the specified time.

How is personal loan different to payday loan?

Most people find it difficult when it comes to distinguishing between personal loans and payday loans. Let’s look at the differences between the two.

Cost

Personal loans’ are cheaper compared to payday loans; however, they require you to have a good credit score. If you believe that you have a good credit score, you can begin by comparing different personal loan quotes. In the event that they turn you down, consider the payday loans, they are a good option, but there are relatively expensive.

Credit Score

Payday loans don’t mind your credit score; they are available for people with little, bad or no credit score. Most payday loans are quickly granted without having to do lots of certifications. Most lenders will only ask for proof of identity and income. On the other hand, personal loans will mostly require you to have a good credit score. They also call for documentation or a guarantor.

Time frame

With personal loans, you can repay for longer periods and at low installments. These loans also have lower interest rates, lesser fees and can be repaid even over a span of one year. Payday loans are the opposite; you are required to pay sooner, and the fees and interest rates are relatively high. This means that at the end of the day, payday loans can see you dig deeper into your pockets and make you more indebted as compared to personal loans.

Here are few advantages of personal loan

Multipurpose

One of the greatest advantages that is brought out by personal loans is the fact that one can use it for a variety of purposes unlike other loans such as housing loans which can only be used for specific purpose. This means that you are free to utilize your money in whichever way you like.

Time efficiency

Once you apply for a personal loan and you avail all the necessary documentation, you can be assured that disbursement of money to your account will take much less time as compared to other loans. This means that personal loans are highly effective and efficient especially in instances where you urgently need some funds.

Collateral is exceptional

Most loans will require you to provide one or two collaterals as security. People who lack fixed assets are thus locked out. If you are one of these people, then you don’t need to worry as personal loans are there for you. Most personal loans will not require you to have collaterals for you to be credited.

Here are few disadvantages of personal loan

High interest rates

Undoubtedly, this is one of the major drawbacks of this type of loan. Since most of them are unsecured, the lenders or banks tend to charge higher interests rates when you compare to other types of loans like mortgage or vehicle loans.

Hard to get

To get a personal loan, it’s not that easy. You at least need to have a good credit score or a good credit rating. This requirement can pose as a huge barrier to people who have never taken a loan in their life. Lack of history may make you ineligible for personal loans.

Part repayment

Unlike other types of loans, lenders who offer these loans do not accept part repayment. This, in turn, may see you accumulate a bigger debt instead of lessening your debts. Consider a case where you have a $50000 personal loan, and you want to repay $5000. The lender or bank will not accept such a part repayment. If it were a different type of loan, this would have been accepted. Part repayment is good as it helps to reduce the loan and the overall interest accrued.

How to get personal loan with bad credit

A bad credit score doesn’t necessarily mean that you can’t get a personal loan. Read on and learn how to get personal loan with a bad credit score. Here are a few tips that can help you out

Lenders who accept bad credit scores

There are some lenders who understand and accept bad credit scores. Usually, they provide different flexibilities to their borrowers. Though the minimum APRs may vary, borrowers with bad credit score can still get loans but will have to pay higher interests at the end of it all. One main and Lending point are good lenders who can give you loans even if you have poor credit score.

Secured personal loans

If your credit score is quite poor, you ought to consider lenders who offer personal loans with some securities such as cars. Certificates of deposits can also be used as securities. Some lenders can also use cosigners as securities of your loan. This implies that should you fail to pay, your cosigner should help you repay. In most cases, cosigners will help you get a lower interest rate as compared to when you get the loan by yourself.

The bottom line

Personal loans are good. They ought to help you solve your personal problems other that delaying or postponing the trouble. If you have a bad credit score, you can still get to take this type of loan. All you require is to have some collateral to serve you as a security. It’s important to point out that you need to enquire your lender or bank if they have any additional charges before you take a loan with them. We really hope that this article will go a long way in enlightening you more about personal loans.