Personal Loans – Different Types and How to Get One

A personal loan is designed to help you get the money you need fast when you don’t have other resources or credit to use. When it comes to borrowing money, there are different types of loans to choose from, and each one has its own pros and cons. If you want to borrow money as quickly as possible, then you may want to consider getting a personal loan, which will provide quick cash with little effort and fewer approvals than some other loan options. However, each type of loan has different terms and features that are worth considering before signing on the dotted line.

Personal Loan Basics
What is a personal loan? A personal loan, or unsecured loan, is a type of financing where you borrow money from a financial institution based on your credit history. Unlike other loans (such as mortgages or car loans), you aren’t offered collateral to secure your debt. Instead, your income and credit history act as guarantees that you’ll pay back your loan with interest.

Should I Consider Personal Loans?
Lending money is risky, so if you choose a personal loan for financing, be sure that you consider all factors including your credit score, debt-to-income ratio, and other financial obligations. You should also make sure that you can afford monthly payments before applying for a personal loan. If approved, you may be able to use funds from a personal loan for almost anything. From paying off credit card debt or purchasing a new car to adding on an addition to your home or even starting your own business.

Credit Score
Before taking out a personal loan, you’ll need to have a solid credit score. According to Forbes, most lenders will want your credit score at least in the 600s. Having excellent credit will make it easier for you to qualify for more money, lower rates, and flexible repayment options. You can check your free credit report on websites such as Experian.

Loan Terms & Interest Rates
Loan terms can vary depending on different factors. If you apply for a loan online, your options will be limited because of your credit score. Longer-term loans with lower interest rates are more accessible to people with higher credit scores. A few lenders allow you to choose how long you want your term; others choose it for you based on your needs and financial situation. When applying for a personal loan, carefully consider what you need it for so that your choice of terms will fit into your overall financial goals.

Can I Get a Personal Loan with Bad Credit?
While many people assume that getting a personal loan with bad credit is not possible, it is actually easier than you think. Secured loans are loans in which you put up an asset as collateral against your debt obligation. If you have an asset, such as a car or house, then you can get a personal loan. For example, if you have a car worth $5,000 and your loan balance is $5,000 then your monthly payments will be lower because interest rates are generally lower on secured loans.

How Much Money Can I Borrow?
Lenders will often decide how much you can borrow by looking at your current income, expenses, credit score, and other factors. If you have a high credit score, lenders may give you more money than if your score is lower. The higher your credit score, the better your chances of getting approved for a loan.

Additional Fees & Requirements
Personal loans are a type of loan issued from a private lender. In exchange for lending you money, your bank or credit union will likely charge you an origination fee or a loan servicing fee. These fees help cover costs associated with providing consumer loans, such as employee salaries, legal counsel, and administrative support. Before applying for a personal loan, make sure you are aware of all potential fees involved.

How Long Does it Take to Get Approved?
Some personal loans are approved in a matter of minutes, but others can take several days or even weeks. The time depends on your bank’s approval process. Check with your bank for details about how long it takes to get an answer on an application. If you’re going through a financial institution that specializes in personal loans, such as Lending Club or Prosper, expect a quicker turnaround time than with a traditional financial institution.

What Are Other Important Things To Know?
Personal loans are one of many types of unsecured lending products offered by banks. They come with lower interest rates than other loan products. You can get personal loans that range from $1,000 to $50,000 depending on your credit score. The length of repayment also varies from 6 months to 7 years, depending on your loan’s terms. Most personal loans have fixed-rate terms unless you opt for a variable-rate product.