Chances are, this is not the first time you have heard of loans.
In fact, you might have already heard of various types of loans. How do you set personal loans apart from the others?
Personal loans are usually short term loans. Some money lenders offer personal loan payable from a week up to a couple of months. Most banks offer personal loans payable from 12 months up to 36 months.
Mortgage loans can stretch up to 20 years depending on the value of the property being pledged. With mortgage loans, the funds are borrowed against a property such as a home or a car.
Personal loans, on the other hand, do not usually require a collateral. However, some financial institutions may have a different set of requirements.
Who qualifies for a personal loan?
The eligibility and required documents vary depending on the financial institution. However, most of them require the borrower to be of legal age and not exceeding 65 or 70 years old. The borrower has to provide valid IDs, proof of regular income or funds, and billing address.
Each lender has a different way of evaluating the credit worthiness of the borrower. Thus, it is your responsibility to provide the needed documents to prove that you are eligible.
Types of Personal Loan
- Secured loan
A secured loan needs a property or any acceptable collateral to be approved. It is usually long term in banks and short term in pawn shops. Using this type of loan could put your property at risk should you fail to settle your loan.
- Unsecured loan
Unsecured loans do not need any collateral. Some lenders may require a guarantor, while others do not. This type of loan is usually short term and may take a couple of months depending on the borrower’s need and lender’s discretion.
- Fixed personal loans
Fixed personal loans are loans which has fixed interest rate. This is best for those who want to make long term plans on their finances.
- Variable rate personal loans
Variable rate personal loans are loans with interest rates that can change every certain period. It lowers the interest charged if the interest rate lowers; however, it will also increase from time to time.
- Online personal loans
Online personal loans are loans which are processed online. You can apply through the lender’s website which makes the process faster and easier. Most of them release funds to the borrower’s bank account or you can also opt to get it personally from their office.
When taking out a personal loan, you need to consider what type would be the most convenient for you. Personal loans are more useful if you choose the best option to fit your purpose and current finances.