When dealing with finances we come across various situations where our expenses sometimes go out of hand, maybe due to unexpected expenses or due to overspending. These expenses can either add up to your debts or you can easily pay them back by taking the loan. They are a solution to every financial issue that you may face. Loans are the sum of money borrowed that is required to be paid back with interest.
For any unplanned expense, emergency or paying for on-going debts, loans are really helpful. You can take these from the bank or any other financial institution. Many loan options are emerging online.
Everything costs a lot, from buying expensive smartphones to going on a dream vacation, studying at best college or planning to buy a new car, this is where personal loans are quite like a friend in need. These work as a quick fix to all your personal financial needs.
To get approved for loans one needs the right credit score, which is a statistical number that checks the creditability of the borrower. It assures lenders that the money they are giving to the one in need would be able to pay back.
Types:
Unsecured loans do not require putting any kind of security in exchange for a loan such as a house. It is quite risky for a lender that’s why they charge a slightly higher annual rate. Your approval for such loans depends upon your credit scores. A repayment plan is decided and the term of return usually ranges from 1 to 7 years.
On the other hand, secured loans require putting up collateral which makes it safe for the lender. In this, you can borrow against your car or house or any other asset. Loans such as car loans or house loans come under these.
If you are looking to take up a loan without disturbing your budget, the fixed-rate comes quite handy. They have a feature of fixed-rate and monthly payments. Here you don’t have to worry about payments changing. It’s the best option if you are looking for consistent loan options.
Comes with a standard rate set by banks, Variable rate usually carry a lower percentage rate. Depending upon the fluctuations on these standard rates can affect your monthly payments and total interest rate; they can rise and fall along with these fluctuations.
In Debt consolidation loans, all your debts are combined into one debt amount that needs to be paid back. This becomes a new loan. They carry a low annual percentage rate, these loans easily make paying back loan quite easy.
If you have poor or no credit score then co-sign loans are your friend in need. Here, all you need is someone to promise to repay in case you fail to do so. Adding a co-signer helps in strengthening your chances for approval who also benefits by getting a luxury of low rates and flexible terms. The only issue that you can face is finding someone with a good credit score.
Peer to peer lending is an online platform where you can easily apply for loans by cutting the middleman between you, the borrower and lender. All you have to do is submit an online application with your requirements and documents.
After a thorough background check, a lender will contact you and if your credit score is good you get the loan instantly without any hassles and minimum paperwork. Here, you get the benefit of getting a fast loan especially in case of any kind of emergency. So with easy application, reasonable interest rate and hassle-free funding is quite a popular option for taking loans.
A personal line of credit works like credit cards, instead of getting lump sum amount you get access to a credit line from which you can use money depending upon your needs. These are best when you need for any current ongoing debt.
Other types:
A payday loan is a short term loan which is quite affordable; they are best since they offer low-interest rate. They are offered by federal credit unions, but their repayment plan is quite longer than other loans.
Credit card cash advance offers cash advance that you can borrow on your credit card available balance.
Pros and cons of personal loans
These loans are quite beneficial and do not require putting any collateral for security, with flexibility in using these loans and minimum paperwork these loans have attracted many people for solving their financial situations, which makes them multi-purpose.
Despite all these features, they have a high-interest rate and do not require any kind of security. Sometimes there is a penalty for part payment or early payment; also with bad credit history, you might not even get approval.
