With the popularity of Personal Loans steadily increasing in the loan market today, I am pretty sure that you are more or less aware of what these loans actually entail. Personal loans are fundamental loans taken to simplify or assist you in your financial lifestyle. With the ever-increasing standard of living on one hand and your monthly paychecks stagnant on the other, meeting daily demands becomes risky as well. A personal loan is that good Samaritan that can serve as a necessity or a luxury.
For example, Personal Loans can support necessities such as house bills, rent arrears, children’s education and, in addition, luxuries such as the house of your dreams, the long-awaited car or the necessary vacations. Personal loans are all you need when you’re feeling strapped for a fixed income. Therefore, if necessary, open your mind to this concept of Personal Loans because, simply, you win with it!
Personal loans are of two types: secured and unsecured personal loans.
Guaranteed personal loans:
· Secured Personal Loans require any insurable collateral to be presented against the loan. Collateral can be an asset such as your home or car.
· Collateral reduces the risk a lender faces and therefore these loans have low interest rates and flexible repayment terms. These niceties vary based on loan amount, credit score, financial situation, etc.
· Good credit can reduce interest, while bad credit can reverse that.
· For Secured Personal Loans, the loan amount ranges from £5,000 to £75,000 and the repayment period ranges from 5 to 25 years.
· However, any default in your payments leads to the forfeiture of your guarantee.
· In addition, many borrowers have no collateral to offer more than their home, and putting their home at risk is not something most people would consider.
Unsecured personal loans:
· Unsecured personal loans are based entirely on the character and financial capacity of the borrower.
· For unsecured personal loans no collateral is required and therefore these loans are difficult to obtain. They are ideal for tenants and non-owners since they do not have properties to pledge.
· Since no security is offered, a lender cannot be sure of repayment; therefore, you are under more risk and therefore the interest rates in this case are higher.
· For the same reason, lenders limit the value of unsecured personal loans to £25,000. The interest also ranges from 7% to 30%.
· The repayment term of an unsecured loan starts from 6 months and can go up to 10 years. Generally, the loan repayment term for an unsecured loan is shorter than for a secured loan.
· Since the time required for collateral valuation is eliminated, these loans are quicker to obtain and the loan amount is available very quickly.
· Since unsecured personal loans are approved solely on the basis of the borrower’s character and ability to repay, poor credit history becomes an obstacle in the process.
Procedure for approval of Personal Loans:
· Choose a loan with interest rates and payment terms that suit your economic situation. Expert advice is best to find out about all the suitable loans available.
· It is necessary to fill in an application form. It is generally preferred to be brief but clear. Approval is facilitated if the application form provides explicit information.
· Submit required documents such as credit statement, income statement/proof, etc.
· Income verification is performed. Assets are verified through two-month statements.
· The lender now makes his decision based on the amount, the terms selected, your credit history, etc. This process takes 24 to 48 hours.
Today, Personal Loans are taken without hesitation. Due to this popularity of Personal Loans, more and more lenders are emerging, each offering better options than the other. Expert advice will help in decision making. By being aware of your financial condition, you can better choose your loan options. Therefore, the final decision is reserved for you. Explore your options and familiarize yourself with the terms and conditions of personal loans before deciding on any. You can request these quotes at different loan lenders and thus compare loans. You just need to shop around to find the best deal!