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Personal Loans: Is This the Right Loan for Me?
Finding the right loan for your needs and financial circumstances can be challenging. You might have considered personal loans, but you aren’t certain whether this form of financing is the right one for you or not. If you’re clueless, we’re here to shed some light on the topic.
Personal Loans – Unsecured Form of Debt
First and foremost, personal loans are general purpose loans. This means you can use them for numerous purposes such as paying for a home improvement project, renovating the house, consolidating debt, and the list may go on. In comparison with credit cards, personal loans could be more difficult to get. That is due to the qualification requirements that tend to be stricter.
Moving on, personal loans with online approval are usually unsecured (definition here) like payday loans. This means you don’t have to use an asset as collateral. Therefore, in the case in which you default on the loan, the lender won’t have the option of seizing the asset. As a result, getting approved for a personal loan could be a bit challenging – specifically if your credit history isn’t the best.
At the same time, even if we’re talking about an unsecured form of debt, this doesn’t mean that the lender can’t do anything if you default on the loan. In truth, it can take collection actions – such as reporting late payments to credit bureaus, or hiring a collection agency, and lastly filing a lawsuit against you.
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You Can Borrow a Fixed Amount of Money
Another thing you should note about online personal loans is that you can borrow a fixed amount of money. The amount you can borrow usually ranges from $1,000 to $50,000.
The aspects that matter most are your income, your outstanding debt, as well as your credit rating – of course. That is to say, the higher the credit rating, the higher the sum you can borrow. Nonetheless, it’s worth noting that some lenders have a cap concerning the amount of money they lend.
Moving on, in comparison to credit cards, personal loans are one-time loans. In other words, you don’t have the option of borrowing from the loan, as you would in the case of a revolving credit card balance. By making payments, you’ll evidently reduce the balance. After paying off the loan, your account will be closed. In the case in which you plan on borrowing again, you need to reapply.
The Interest Rates Are Fixed
Furthermore, personal loans come with fixed interest rates. Hence, you don’t have to worry that it will change throughout the lifespan of the loan. This is a good thing, as it allows you to budget your finances accordingly. As for the interest rate you get, it is dependent on your credit score – the higher the credit score, the more favorable the interest rate will be. It’s as simple as that.
Final Thoughts
We hope that our article on personal loans answered most of your questions. Bear in mind that applying for a personal loan affects your credit – so take the time to analyze the pros and cons of this decision, by considering your financial circumstances. Use our personal loan calculator and find a suitable loan.
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Late Payment Implications
It is highly recommended to contact the lender if late payment is expected or considered possible. In this case, late payment fees and charges may be implied. Federal and state regulations are determined for the cases of late payment and may vary from case to case. All the details concerning the procedures and costs associated with late payment are disclosed in loan agreement and should be reviewed prior to signing any related document.
Non-payment Implications
Financial and non-financial penalties may be implied in cases of non-payment or missed payment. Fees and other financial charges for late payment are to be disclosed in loan agreement. Additional actions related to non-payment, such as renewals, may be implied upon given consent. The terms of renewal are to be disclosed in each loan agreement individually. Additional charges and fees associated with renewal may be applied.
Debt collection practices and other related procedures may be performed. All the actions related to these practices are adjusted to Fair Debt Collection Practices Act regulations and other applicable federal and state laws in order to protect consumers from unfair lending and negative borrowing experience. The majority of lenders do not refer to outside collection agencies and attempt to collect the debt via in-house means.
Non-payment and late payment may have negative impact on the borrowers’ credit standing and downgrade their credit scores, as the lenders may report delinquency to credit bureaus, including but not limited to Equifax, Transunion, and Experian. In this case the results of non-payment and late payment may be recorded and remain in credit reports for the determined amount of time.