As the name may suggest, a personal loan is a general purpose loan you can borrow from a financial institution online or a brick and mortar bank. You can use your personal loan for whatever you wish to, such as meeting hospital expenses, paying for tuition, paying for home remodeling, going for the much needed holiday or even consolidating your accruing debts.
Just because you have the liberty to do what you wish with a personal loan does not mean it’s different from other loans. What this means is you have to meet the basic lending criteria put in place by your financier, and more importantly, you must repay the loan within the stipulated terms and conditions. Other critical factors you should know about these loans include.
As is with most financial options, the amount you are entitled to when obtaining a personal loan is mostly determined by your credit rating, your income level as well as your borrowing history.
Even so, it is not uncommon to have some lending institutions set pre-fixed amounts.
Unless on very rare occasions, most personal loans are unsecured.
This justifies the huge popularity of personal loans in the finance world today. Personal loans are a type of high risk loan to the lender since there is no security attached to them. The unsecured nature of these facilities does not mean you can easily default however you want; a lender can always hire a collection agency or even file a suit in a court of law.
Another key fact to keep in mind is personal loans will most often than not have fixed interest rates.Even so, you should be advised that these rates are often based on your credit rating meaning the better your rating the much favorable the interest rate would be for your quick loan.
However, some loans can have variable interest rates, and such loans are quite attractive to many people.
the variability of the interest rates means you will have a difficult time planning your payouts, since you are not sure of the interest rates. Variable interest rates are the no.1 contributor to loan defaulting.
Needless to mention, your ratings can significantly be affected, meaning your prospects of obtaining a loan or getting a credit card in future can as well be much affected.
Having said that, you can make an informed decision when it comes to obtaining personal unsecured loans. Luckily, there are many lenders, both online and offline, who can always come through for you at the nick of time when you desperately need that cash. When you factor in your credit rating, your borrower’s history and your income level, you can easily get financing for a pressing need.