A personal loan is a fixed amount of money borrowed from a credit union, bank, or online lender. Their amounts can vary, as do the interest rates charged. Typically, personal loans are designed to be paid back quickly, often within a year.
Most personal loans are not secured by collateral—something of value that can be repossessed by the lender if the borrower defaults on the loan. Personal loans are known as “unsecured” loans, because they are backed only by the borrower’s promise to repay the balance.
Application and Approval Process
A completed application for a personal loan often includes income information, the loan amount, loan term, and sometimes a credit check, depending on the lender. The amount of time it takes to receive the funds also varies by lender. Not all personal loans are the same, so it is important to consider APR, and fees associated with the loan, such as prepayment penalties or origination fees.
Some personal loan lenders will factor in credit score, credit report, and debt-to-income ratio in the qualification process. If so, to decide the loan amount, term, and interest rate, they will verify income and debts, and assign borrowers a credit grade based off of their credit score and report. However, some lenders require no credit check at all, and even offer declining rates programs and cash back rewards programs for on-time payments.
What To Use Personal Loans For
Personal loans can serve a variety of financial functions, from debt consolidation to investments or large purchases. They can be tailored to meet your needs, from regular living expenses to unexpected ones, from medical bills to mortgages, from special events to home improvement, and beyond.
Advantages to Personal Loans
- No lengthy appraisal process required for collateral
- Lower interest rates than payday loans
- Higher borrowing limit than many credit cards
- Payment schedule can be customized to work for your budget
- Can help consolidate debts into a single payment at a lower interest rate
- Installment debt is favored over revolving debt by credit scoring systems, so personal loans can improve credit rating
Personal loans can be the swift reprieve needed in the face of a financial fix; however, they are a debt, and one that merits careful consideration. Visit LiftCredit.Com for personal installment loans that will best suit your needs.