Personal loans are short term loans that allow borrowers to borrow funds from banks or other financial institutions. They are usually taken out for home improvements, car repairs, medical emergencies, wedding expenses, etc.
Personal loans are very helpful for those who want to improve their credit score. In addition, they also provide borrowers with flexibility and convenience. Personal loans like the ones from CreditNinja are perfect for when you’re strapped for cash in an emergency or for a big upcoming event.
Of course, the truth is that a lot of people don’t know a whole lot about personal loans. Thankfully, we’re here to fill any gaps in your knowledge! Here’s everything you need to know about personal loans.
Table of Contents
What Is a Personal Loan?
A personal loan is a small, short-term unsecured loan that allows individuals to access money quickly. It can be used for almost anything as long as it doesn’t have a negative impact on future borrowing.
It is also referred to as an unsecured loan, since it isn’t secured against any things that you own like cars or properties.
What are Personal Loans Used For?
Personal loans can be used for all sorts of things. As mentioned earlier, they’re great if you have an unexpected expense or if you just need some extra money. But, there are many more reasons why someone might take out a personal loan.
For example, a personal loan could help pay off debts faster or it could even be used as a down payment on a house. It really depends on what you need the money for.
People may also choose to take out a personal loan to pay for things like vehicles, home improvements, weddings and for balancing out their debts. You will need to check with the lender though, since some lenders may have limits on what things you can borrow for. For instance, some lenders may not allow you to take out a loan to pay off a medical bill or a funeral.
Personal Loan Benefits
There are several benefits to taking out a personal loan. One of the biggest benefits is that you won’t have to wait weeks or months to receive your money. With a personal loan, you’ll typically get your money within 72 hours after applying. This means that you can use the money immediately instead of having to wait until next month. This is ideal if you are strapped for cash right now and need the money as soon as possible.
The loan repayments also tend to be fairly flexible. Most personal loans offer variable rates meaning that the interest rate changes depending on market conditions. If you find yourself in a situation where you need to make larger payments than usual, you should be able to do so without much hassle.
Another benefit of personal loans is that they give you access to a large amount of money if you fit the right criteria, and they don’t need to be tethered to a particular item like a vehicle or a home.
How Much Can I Borrow With A Personal Loan?
This varies depending on the lender and the type of loan. When applying for a personal loan, most lenders will ask you how much you want to borrow. This amount is called your “personal loan limit” (or sometimes, your “limit”).
Your personal loan limit is based on your income. The higher your income, the lower your limit will be.
The amount that you can borrow will often depend on your credit score and other factors. If you have bad credit, then you may only be able to get a small personal loan. On the other hand, if you have good credit, then you’ll likely be able to borrow much more.
How Do I Get a Personal Loan?
You can apply online, over the phone or in your local bank branch – it ultimately depends on the lender. In any case, you’ll need to provide information such as your name, address, employment status, bank account details, and proof of identity. Once you’ve provided this information, you’ll usually be asked questions about your financial situation. These include questions about your monthly expenses, savings goals, and whether you have any outstanding debt.
Once you’re ready, you’ll fill out a form which includes your answers to these questions. Next, you’ll answer additional questions about your creditworthiness. Some lenders will require you to provide copies of your previous income statements from your current and past employers. They may also ask for copies of your recent tax returns.
Once you’ve completed all of the required paperwork, the lender will run a background check on you. This involves checking your credit history and looking at your payment history with other creditors. They will do a credit search where they pull your credit report from one of the three major credit reporting agencies.
If everything checks out, you’ll be given an approval decision. You’ll either be approved or denied. If you’re approved, then you’ll be given a lending date. This is when you’ll need to pay back the money borrowed. It’s important to remember that the repayment period isn’t set in stone. Your lender may allow you to extend the repayment term if necessary. It’s worth negotiating the terms with the lender based on your income and how much you can reasonably pay back each month.
What Are Some Cons of Personal Loans?
Personal loans are great because they offer flexible borrowing options. However, there are some cons associated with them. One of the biggest issues is interest rates. Most people who take out a personal loan are charged high interest rates. This means that you could end up paying a lot more than you originally planned.
The payments are also fixed, which can be an issue if you end up with a change of circumstances and can’t afford the original payment.
In most cases you will also need to have a decent credit history. With that being said, there are certainly personal loans that you can use if you do have a poor credit score.
Conclusion
Personal loans aren’t always suitable for everyone. But if you’re looking for a way to fund a big purchase, then they might just be what you need. Just make sure that you understand the pros and cons before taking out a personal loan.
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