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Everyone has plans for their life..
Have you ever possessed the desire to accomplish something financially but have lacked the cash on hand necessary to do so? Perhaps you wanted to pay for your dream wedding, start your own business, or build an addition onto your house. Such life tasks can require substantial upfront funding that you may not initially have. Regardless of your financial need, a personal loan is an option to help you achieve your goals and bring your dreams to reality.
Let’s dive into the details of personal loans…
What are they?
A personal loan is defined as money that is borrowed and paid back with interest over a predetermined period of time. These loans are versatile and are used for a multitude of purposes. A few examples of common uses for personal loans are:
Debt consolidation loans
Home improvement loans
Small business expenses
Personal loans are utilized to fulfill virtually any sort of monetary need. In an unpredictable and ever-changing world, it can be an effective tool to quell any immediate financial pressure. In certain circumstances, they act as a safety net for somebody that is tasked with paying unanticipated bills, but can also allow an individual to broaden their immediate financial potential, even if they are not under any sort of financial pressure. You can apply for a personal loan if you desperately need one, but also if you simply would like more cash in your pocket at a given moment.
Secured vs. Unsecured
These types of loans require collateral (something of value to put up against the loan). Examples of collateral include cash in a savings account, a house, an expensive car, or expensive artwork or jewelry.
These types of loans do not require collateral. To be approved for an unsecured loan you generally need to have a higher credit score and income. These types of loans are generally harder to get because the lender will probably have a hard time getting their money back if you don’t pay them.
Fixed Vs. Variable
Fixed and variable, in this instance, refers to the rate of interest that you pay on the loan. These terms are agreed upon prior to the loan being issued.
Fixed rates of interest cannot change. These types of loans are much more common.
Variable rates of interest can fluctuate throughout the length of the lease. These fluctuations are usually tied to the interest rate at which banks and other institutions are able to borrow money.
How to compare loans
There are three main ways that you can compare different types of personal loans: the interest rate, loan term, and fees. Each of these will most likely be relatively similar at different institutions. However, when it comes to personal loans, the devil is in the details.
- Interest rate - This is the rate of interest that you will pay over the course of the loan. Take these with a lot of scrutinies. Even a 1% change can save or cost you a significant amount of money.
- Loan term - The length of time that you have to repay the loan. Generally, the longer the term the lower the payment and vice versa.
- Fees - Be sure to inquire about any other fees that you may be charged for before signing the loan papers.
Be sure to do thorough research before entering into an agreement for a personal loan. Additionally, it is usually a good idea to get a few different offers before making a decision. It is imperative to be completely clear on every aspect of your loan agreement.
Should you apply for one?
This question can only be answered on an individual basis and is dependent on what exactly you need the money for, as well as the current state of your finances. However, if any of the following apply to you then we’d recommend looking into applying for a personal loan:
- You’ve done a significant amount of research and are positive you have the resources to repay the loan.
- You’re comfortable taking on the responsibility of repaying.
- You absolutely need the money and don’t have any other way of getting it.
We hope that you found this article valuable in understanding what a personal loan is. If you’re interested in speaking with a professional regarding personal loans feel free to reach out to us!
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