The way things are going up, most citizens are opting to borrow money using personal loans, it might be a personal loan for a deposit on a car or if you’re trying to make it through the month. So what is a personal loan exactly? Lets break personal loans below,
Applying for a Personal Loan
Because of the growing IT world, most personal loan institutions now cater for a simple online loan application process through your ID number as a method of calculating your current credit record – picking up previous defaulted debit orders or payment ordere against your ID.
When your credit score is good, the required documents must be completed or agreeing terms over the phone with a consultant, you can easily email them to the company fascilitating the personal loan and the process is completed once the company is 100% sure that you can pay the personal loan installments.
Short/mid- term personal Loans
Best options of borrowing people opt to select are short and mid-term loans, such as personal loans (also known as short-term loans), credit cards, bank overdrafts, vehicle finance, store cards and in-store finance, normally called hire-purchase or a credit agreement.
Long- term personal loans
long-term options are less, but they encompass long-term personal loans also included arr mortgages, also known as home loans & bonds. Debt consolidation is another long-term option because this is usually a form of mortgage that is secured on a house.
Use for a variety of purchases
Personal loan benefits include the fact that you can use your cash for just about any purchase. It’s possible to use a personal loan for starting a business, buying a car, or renovating your home.
Other loan types may place restrictions on what the funds may be used for. Not so with personal loans, making them a flexible option to fit most situations.
With the lower interest rate, you can use a personal loan to consolidate high-interest debt. Depending on your situation, you might be able to use one larger personal loan to pay off several smaller debts with high interest, including student loans or credit cards.
Debt consolidation has its own benefits. When you consolidate debt with a personal loan, you can save money on interest and pay off what you owe faster. Not only that, but you also combine several loans in one place under a single umbrella.
This can be very helpful if you struggle to make your payments on time or if you’re having trouble keeping track of each account. Combining everything together can help you better manage your debt repayment plan while saving you money in the long run.
Smooth your cash flow
I’ve used personal loans in the past to smooth my cash flow. If I know that a client might not pay on time, a personal loan can come in handy. If you need to bridge a temporary gap, there are benefits of personal loans.
One alternate way to use personal loans is to get a personal line of credit instead of an installment loan. My personal line of credit with my bank comes with a low interest rate, and it’s connected to my checking account.
Disadvantages of Personal Loan
There are strict guidelines and qualification criteria involved in personal loan, vary from one bank to the other and the lenders. It is not possible for everyone to get it.
Only a person with good credit history, can get a personal loan. No lender would want a bad debt for the amount he lends.
It is compulsory for you to have a bank account if you wish to advantage a personal loan. Not essentially with the bank you are applying for.
As it is an unsecured loan, the risk is fairly high for the lender because there is no collateral security or guarantee with them.
Personal Loan Banks