Are you planning to tie the knot this year or perhaps looking to expand a startup? Then, a personal loan might be a hassle-free and fast financing option for your needs. There are different loan options for varied circumstances. This makes personal loans a popular option because you can take out a loan for almost any legitimate purpose without any financial institution spying on your credit reputation.
What is a Personal Loan?
As the name implies, personal loans are taken out by individuals from banks or non-banking financial companies (NBFC) to augment personal financial needs. The bank will not be fixated on monitoring its use as long as the borrower has a responsible and legal purpose for the loan.
Unlike a business loan, home loan, or auto loan, a personal loan is versatile and can be diversified into many purposes. You can use a personal loan to renovate a house, buy the latest gadgets, fund a business, go on a dream escapade or hiatus on an island somewhere, pay tuition fees, do a home makeover, or for emergency purposes like for paying medical bills.
In addition, personal loans also have a shorter-term arrangement in comparison to auto loans or mortgage loans that span for several months or years.
Types of Personal Loan
Getting out of the debt trap is easy with personal loans. However, you should know how much the interest rates are and the repayment terms so you can plan ahead and be on top of your finances. Personal loans can be identified in two types:
- Secured Loans – Assets will be placed as a form of collateral or security when securing this type of personal loan. Approval of your loan then is tied up to a collateral. The borrower can put his car or home as a form of collateral which will be seized by the debtor in case the borrower fails to repay debt or meet certain conditions.
- Unsecured Loans – This type of personal loan is suited to borrowers who have a good credit history or has a high credit rating to boost speedy approval because a collateral would not be necessary or required. This may not be a good match for those who are blacklisted or have a negative credit rating. It is also not suitable for those who are in the process of growing his or her credit history.
Benefits of Securing Small Personal Loans
Many people look at personal loans as a life-saver in times of financial crisis or emergencies. Below are the advantages of securing personal loans and how it can keep you out of financial blunders fast:
Less Paperwork Necessary
There is very minimal documentation needed when applying for personal loans. This proves to be a hassle-free loan option as compared to other loan types that would require tons of documents before your applications get processed and approved. In fact, there are even personal loan companies that would not require you to submit any form of documents. You have higher chances of approval with personal loans and less restrictions.
Do you have an excellent credit history? Then this will unlock your privileges and qualify for low-interest rates. Your interest rate would actually depend on your credit rating. Borrowers with good credit scores get to enjoy low-interest rates or an APR of 6% or less while those with low credit ratings have to pay around 15% APR.
Versatility of Uses
Getting a personal loan will help you manage your finances easily especially in making big purchases that you cannot afford at the moment. There are fewer restrictions with this loan type and less rigid conditions which in turn allows you more freedom in your purchases.
According to Entrepreneur, many banks are quite hesitant with approving small business loans. Business loans would usually translate to huge amounts which may not be a match for startups who are initially requiring smaller loans as additional capital.
This is why a personal loan may work for many budding startups or small entrepreneurs. Many business owners who are just starting out see personal loans as an easy route to getting cash on hand and get the business rolling even without a solid financial track record in the industry. Small- and medium-scale entrepreneurs or businesses would be able to take out a loan
When you have existing debts such as payday loans or student loans and credit card debts, a personal loan can help you consolidate high-interest debts so you can manage debt repayments easily and even lower interest rates in the process when you get to roll all loans into a single repayment plan.
This works like refinancing so you get to lower your interest rates and monthly repayments that will eventually help you manage your cash flow.
Help Improve Your Credit Score
Making sure that you are able to pay your personal loans promptly will help boost your creditworthiness and improve credit score. This is a good move especially if you are trying to build your credit reputation and uplift your credit score. Having an account mix is favorable for fixing or building your credit score.
Quick Approval and Disbursement of Funds
Accidents happen in a blink of an eye and bills have due dates to follow. These financial needs cannot wait which makes personal loans the best option for any kind of emergency. You can expect quick approval of your personal loans unlike home credit or auto loans. Funds are also readily available in a few days and won’t be as tedious as waiting for weeks or months to get your funds.There are many benefits that make Personal Money Network an easy pick. You can turn to personal loans as a wise means to save and keep your finances right on track. This is also an easy and quick route to getting a loan without the ridiculously high-interest rates and lengthy paperwork especially when you need funds right away. With personal loans, you get to have flexibility and power at your fingertips as to how you leverage and what to do with your money.
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