A new and a more flexible type of loan product is getting more and more popular. Personal loans, also know as unsecured loans, constitute a type of a loan given to an individual by a bank or lender. These loans are paid monthly and are generally easier to the budget.
It is regarded to be unsecured type of loan as it is not secured against any asset or property and does not require collateral. On average, the amount given for a personal loan ranges between $1,000 and $50,000.
A personal loan should be planned and spent carefully. You should not be waste it on weddings or birthday parties, as it is better to save cash for such expenses. They are cost-efficient and save up a great deal of money if used wisely.
Actually, everyone has his/her particular reasons to request a personal loan. In many cases it is due to unforeseen events. For instance, the most common list of reasons to take such type of a loan include a desire to improve a house, to cover unplanned moving or sudden funeral expenses or to pay medical bills.
A disadvantage is their comparatively high rate of interest, particularly if the sum borrowed in not that large. However, personal loans still offer lower and better interest rates than credit cards.
The interest rate for personal loans is usually calculated based on the borrower’s personal income, credit history and the borrowed amount. In other words, they determine a borrower’s creditworthiness.
Generally, the higher the loan, the lower the interest rate. This usually leads many debtors to get tempted and borrow more than what they actually needed.
The beauty of personal loans is that they may bring many other debts into one; such as payday debts or car loans. This means making just one monthly payment with a fixed rate stretched over a longer time.
Many financial analysts believe that personal loans serve their best only at high-interest credit-card debt consolidation. The interest rate for a personal loan is still lower than annual percentage rate of the credit card.
If you take a personal loan only for credit card consolidation, you should take a careful selection of lender companies. An increasingly popular way to take personal loans has become online peer-to-peer lending.
Currently top 3 online lenders for personal loans are:
- LendingClub: one of the largest p2p companies providing lowest interest rates with no hidden fees. It is one of the two existing platforms that allows non-accredited investors to make marketplace loans.
- Kiva: the world’s largest micro-lending website with quite a convenient interface and thorough explanations that assist a novice borrower and simplify the application procedure.
- Avant: a wonderful source for those whose credit score is lower than 600. However, interest rates start a bit higher in comparison with other online landing platforms.
Still, whatever the need to take a personal loan is, a major advice always stays the same. Carefully weight your pros and cons before taking a personal loan.
Go though a selection of a lender company, calculate your finances taking into account the interest rate and try to keep a good credit score. You may never know what you would need it for!