In need of extra money to complete our pending tasks, we take personal loans. They help us in getting instant money with an interest attached to it, which we pay along with every payment. These loans are for paying the college fee, repayment of debt or even sponsoring marriage. Although, one should take the amount they can pay back.
Types of personal loans:
They have two types as mentioned below:
- Secured Loans: These loans exist only when the collateral is present. Various banks and lenders have different terms and requirements for the collateral. You can secure a loan with your savings account, a cash asset, or your car, a physical asset. You can also use a certificate of deposit (CD) instead of a savings account. In case you default on the loan, the bank or the lender has the right to seize your collateral. This helps them in satisfying the debt.
- Unsecured Loans: In contrast to secured loans, these loans can exist without any collateral. This is easier for the borrower as they don’t have to worry about lenders seizing their assets. Although, the interest rates of unsecured loans are way higher than those of secured ones. Many banks don’t consider these loans safe and only abide by the secured loans. But, various online and offline lenders involve themselves in these practices.
How to get a personal loan?
- The first step is to apply to a lender. Again, this can be an online lender, a bank or any financial institution having permission to do so.
- Usually, as the second step, you would fill out an application and submit it. Now, depending on the lender, they can either accept or reject it.
- Assuming they accept it, you get the loan terms. You review them and then accept or deny them. These terms are important as they include information on interest rates and repayment. Hence, one should read them thoroughly.
- If you accept the terms, then you get to do the paperwork.
- Following that, the amount comes into your account via direct deposit or a check.
Where to find personal loans?
Prioritize your bank or credit union as your first option. You can check what loans you qualify for and consult your bank for the same.
They are also available online as well. They are usually approved in a few minutes, and the amount arrives in 1 to 2 days.
The borrower should keep these points in mind while comparing loans:
- Loan fees.
- The terms of repayment.
- Limits of borrowing.
- The collateral conditions.
- The interest rate.