What You Need to Know About Personal Loans
Personal loans are all-purpose loans that banks provide. You can utilize this type of loan for stuff like unconsolidated debt, a home improvement project and unexpected expenses. There are secured personal loans and unsecured personal loans.
The borrower doesn’t have to give any asset as collateral for unsecured loans. This means the lender can’t take your property if you default payment. The lender has no asset to seize if you can’t finish paying the loan. However, the lender can consider other collection actions. This includes reporting you to credit bureaus, filing a lawsuit against you and using a collection agency.
Conversely, a secured loan is protected by an asset. If you can’t pay back your personal loan, the lender can seize your asset as payment. Items provided as collateral can include houses, cars, business assets and land title deeds.
Personal loans range between $1,000 and $50,000. Your personal loan amount is based on the lender, your credit rating and your income. You have access to more cash if you have a huge income and an excellent credit score.
Personal loans come with fixed interest rates. The interest rates are determined by the credit rating. You may receive lower interest rates if your credit score is good. This means you get to pay less in addition to what you borrowed. Some personal loans come with variable interest rates. Thus, the interest rate changes from time to time causing your payment to fluctuate. It’s harder to budget for a personal loan that comes with an unpredictable interest rate.
Usually, personal loans have a fixed repayment period. The loan period is stated in months. For example, you can be asked to pay in 12, 24, 36, 48 or 60 months. Sometimes, the interest rate depends on the repayment period. Usually, the longer the repayment period, the higher the interest rates. You can also get a pre-payment penalty. This is a fee levied for paying the loan before time. Stay away from loans that have pre-payment penalties.
Most banks give the loan account information of their clients to credit bureaus. The loan account details include your credit score. Every aspect of the loan application process has an effect on your credit. To maintain a good credit score, make your loan payments on time.
When applying for loans, be on the lookout for scams and additional or hidden fees. Don’t get a loan from a lender that asks you to send money so you can secure a loan. In addition, a number of loaners charge additional fees for their services. Therefore, it’s a good thing to look out for extra fees before you take a loan. Read the terms and conditions of the loan carefully to identify any hidden or extra charges.
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