Earlier whenever financial issues used to arise, we only had two options, take a loan from a moneylender at the high-interest rate or keep your valuables as collateral. So, this process was kind of a burden and messy process for everyone.
Now, every time you get stuck with money issues all you have to do is reach your preferred bank or any financial institution and get yourself a loan that can help you with your personal needs.
What are these loans and how it works?
It’s like any other loan. You apply, submit required documents, once verified and credit score is checked, funds are transferred to your account. The repayment plan is decided where a monthly amount to be repaid is decided.
When to get personal loans?
There are situations where one should opt for these loans such as credit card debts, relief from long term loans such as student loans, wedding finance, vacation expense, unexpected expenses like a medical emergency.
The interest rate on these loans
Different financial institution charges a different rate. The rate is decided upon your credit score, income, occupation, tenure, etc
Understanding types of personal loan
Not backed by collateral unsecured personal loans, usually, charge a high-interest rate in contrast to other loans. The benefit of these loans is, you get the amount in the beginning and have a set payment every month. Approval of loans depends on your credit score.
Secured loans are the most common way to get large amounts of money. The risk is if you can’t repay it, the lender can sell your collateral to pay off the loan. The benefit of these loans over unsecured loans: lower rates
With Fixed-rate loans, the rates are fixed for the loans offered which makes interest rate steady. Since they are predictable it’s easier when you know what to pay every month, but there are chances that rates may be higher.
Variable-interest loans are those in which interest rate changes over the lifetime of the loan. Found in line of credit, lenders approve you to borrow up to a certain amount. The bright side of this is that you can borrow what you need and pay every month but with fluctuating rates they sometimes involve fees.
The lending club
When in dire need of a loan, borrowing money becomes quite a hectic little job. There are times when we face emergencies and require quick money in hand. This is where P2P lending comes handy. It’s a platform where investor or lender and borrower or the one who requires money come in contact.
You just have to follow few simple steps, first, you have to register yourself, get your document verified and then get your credit score checked. Once approved by the lender the money is transferred to you. All this process is done online which makes it quick and simple.
It comes with many uses. it’s not specific to any particular kind like home loans or car loan but can be used for any personal requirement. In this, there is no requirement of collateral. You can borrow any amount and you have plenty of time to pay back. For investors, they get regular optimized returns.
There is a fixed payment to be paid every month and if you are unable to do so, you will be charged a certain amount. If you invest money, you need to do a thorough check or you might get stuck.
If you know that personal loans are best for you, ensure the lender is legit and registered. Always compare different offers from different lenders before settling. If there is a prepayment penalty try paying off a loan early. This can be a convenient way of borrowing.