There are different kinds of loans that people with an urgent need
for money can apply for through financial institutions such as banks
and other money lending services, provided that have something to
offer in return as a form of collateral or any kind of assurance that
they can give to lending institutions as to hold on to their
obligations. There are however, some types of loans that do not need
any form of collateral from it's borrowers, most particularly in the
category of personal loans. Personal loans are general purpose loans
in which the money that the lender approves you with is used on your
own discretion. Actually, personal loans are more difficult to be
approved upon by most lenders as it is often based upon strict
requirements that most potential borrowers find hard to comply with.
If you ever find the urgent need to apply for a personal loan with a
banking institution or a lending company for that matter, it is best
to know all the needed requirements in order for you to find out if
you have a fair chance of getting approved.
Personal loans have no assurance of security:
Given the fact of the nature and principles that constitute a
personal loan, it is in fact a loan that offers the lender no such
form of security and assurance that a borrower would be able to
comply with paying up their obligations to the lender. It also means
that the loan in which the borrower would get upon their approval
will not be needing any form of asset as a collateral, in which case
that when a borrower defaults their obligation on a loan, the lender
will have no assurances of getting back the amount that the borrower
had availed. This is one of the reasons in why personal loans have a
higher disapproval rate than any other form of financial loans. The
lender usually recourses to reporting late or bad payments to the
credit bureaus, hiring a certified collection agency to collect bad
debts and filling legal lawsuits against borrowers who fail to comply
with payments. Either way, such incidents will put a bad credit
record on the borrower which will make it difficult for them to avail
any form of financial loans in the future.
Personal loans have fixed interest rates:
Despite of the high rate of disapproval, personal loans are still the
most favorable method of availing emergency funds for various uses as
it has a fixed rate of interest compared to other conventional
financing methods that have fluctuating interest rates. Personal
loans can vary in amount from $500 to $50,000 dollars, which solely
depends upon how good or bad your credit rating is. Having a good
credit rating means that you are given the benefit to borrow an
even bigger amount of money compared to other applicants that have a
less favorable credit score. Some banking institutions have a minimum
amount which you can borrow or you may even well be able to get an
even higher loan amount at a bank that you already have an account
with.
What's good about personal loans is that the contracted interest
rates are fixed for the whole duration, until such time that you have
completely complied with paying off all of your financial obligation
to your lender. Again, having a good credit score would lower the
rate of interest of the amount of the loan that you have availed from
your lender. Interest rates is the cost that you pay for borrowing
money from your lender, in which is how banks and lending companies
earn from your need to borrow money, however, there are banks and
lending institutions that adjust their interest rates as a means of
appropriately anticipating the possibility of you failing to comply
with your monthly financial obligations.
A Fixed Payment Period:
Given the fact that you have been approved because
you have a good credit score, the bank or lending company will also
try to determine the best possible terms of payment that will be
based upon your capacity to pay and the amount that you would like to
avail which will depend on the combination of how much you can pay
and credit rating. Banks and lending companies have a fixed payment
period which will give both the lender and the borrower both the
convenience of time in regards to payment schedules. The most common
payment terms have 12, 24, 36, 48 and 60 months respectively as the
time frame in which the borrower can conveniently choose how long or
how short they can comply with fully paying up their financial
obligations. A shorter period of 12 months would mean a bigger amount
in paying up the principle amount of the money that the borrower has
availed, which would lower the interest rates accordingly. A longer
term of payment would mean adjusting the principle amount of the
money that the borrower has availed, but increasing the amount of
interest. Since this will be a fixed rate of payment, any attempt to
pay off the total amount of the money in advance, would incur a
penalty in behalf of the borrower. It should be put to mind that
banks and lending institutions would like to maximize the potential
of the amount that a borrower has availed from them and even though a
borrower would like to finish their loan obligation, even before the
contracted time, the lenders will always earn from this in all
possible ways that they can. It is also best advise to learn the
basics of how to become an accountant in order for you to fully
understand the accounting
principles of evaluating interest rates in
regards to personal loans.
The easiest way to apply for a personal loan:
To tell you the truth, personal loans are made for
people who have existing credible accounts with any banks that can
support their clients validity of having a verified account with
their institution. The advantage of this is that you can loan a
bigger amount of money that you can use for your own personal use.
Lending institutions such as banks can easily approve anyone who
passes their requirements such as being employed for at least 6
months, has a monthly salary that will not fall below 30% of the
loanable amount that a borrower wishes to avail, has a good, clean
credit record for the past 6 months and has no outstanding
liabilities with any financial institutions. Banks and financial
lending institutions do get a bit nosy sometimes in regards to the
purpose of where you will be spending the money. If you will be very
honest with your intent, they may even recommend some sort of special
financial arrangement that may even help you with your loan
application as to appropriate it with the purpose of your needs.
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