Whether you are planning a big-ticket purchase or are facing a sudden expense that has just popped up out of the blue, an online personal loan from a trustworthy lender may turn out to be an advantageous option to take avail of.
Personal Loans: Explained in a Nutshell
A personal loan is an amount of money you borrow for different purposes. The repayment terms may vary depending on the borrowed amount. The maximum amount for personal loans totals $100000, which should be due in the upcoming years.
You can get personal loans either from banks and credit unions or online lenders. Online lenders are becoming more and more popular due to the lower requirements they set for getting out the loans and the simplicity of the processing.
The Significant Benefits of Personal Loans
Personal loans offer a bunch of significant benefits that perhaps take credit for their skyrocketing popularity. However, among the multiple benefits of personal loans, the most significant ones are:
Fixed Payments
A personal loan is paid back by making fixed monthly payments. Knowing the exact amount of your monthly payments allows you to stay ahead of your finances.
Debt Consolidation
As personal loans have considerably lower interest rates than the other lending products (credit cards and payday loans), you can take them to consolidate your high-interest debts. Debt consolidation allows you not only to save money but also better manage your debts.
Usage Versatility
You can take out personal loans and spend the borrowed sum on anything that comes to your mind: some may get personal loans to organize a pricey wedding, others may need them to combat unexpected expenses, while the third aims to make a major home improvement. Though the lenders don’t question you on spending the loan, they advise the borrowers to make sensible decisions about spending the loan and not to splurge it away as they have to return the money together with the interests.
Availability to All Credits
In contrast to traditional lenders (banks and credit unions), online personal loan lenders are ready to lend money even to bad credit borrowers. Instead of carrying out hard credit checks, these online lenders look at your current financial state and the ability to pay off the debt. Thus, personal loans may be available to those US borrowers who can provide proof of monthly income irrespective of their credit score.
No Collateral Requirement
Most personal loans are unsecured, in other words, the borrowers don’t need to secure the borrowed money against any asset. Hence, there will be lower risks of losing the asset that you set as collateral for getting approved for a personal loan.
The Bottom Line
Personal loans can help you either build your credit score or destroy it at all. Be informed that your on-time monthly payments towards the outstanding balance may boost your credit score. And, on the contrary, any late or missed payment will be reported to the credit bureaus: Equifax, Experian, and TransUnion lowering your credit rating (let’s not forget that 35% of your FICO score belongs to the payment history). Thus, before jumping into a loan, do all the necessary calculations to determine whether you can afford to pay it back. Like any kind of lending product, personal loans also can be advantageous only under the right circumstances, and any credit default in your credit history will make it more difficult for you to get loans in the future.