The Ultimate Guide to Understanding the Reasons to Get Personal Loans

Written by: MoneyPrime Staff
05/31/2019

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A personal loan is much smaller than a mortgage because it is a loan that an individual will use for own use. Most people who get personal loans are using it to renovate a home, purchase a brand new car, finance a vacation, appliances, furniture, cover wedding or funeral costs, health or wellness, and to simply deal with an event that is unpredictable or unexpected.

Personal loans have the power to grant your monetary wishes and needs in life. Each of us will experience a financial need at some point no matter what our profession is without any forewarning. Even if we have sufficient funds or a large amount of savings, there will be times when we can still use extra or additional funds. There are benefits of opting for this kind of loan particularly to those who have a great credit score rating.

The Significance of Personal Loans

A personal loan helps save money especially when it comes to purchasing new appliances or paying for a significant event such as a wedding. The amount that a person can borrow will depend on his or her credit score, eligibility, and income. The higher the income of a person is and the better the credit score, the more money he or she can borrow and the lower the interest rate. Take note that there are several banks that also have a limit when it comes to the total of money that you can borrow through a personal loan. On the other hand, the limit would be ample to produce sufficient capital for emergencies or any possible situation that will require you to liquidate assets.

It can be clearly seen that personal loans are cash advances that assist an individual to gain financial freedom. Some people apply for this loan because they are entangled in debt while others would want to completely eliminate all the stress of coping with a number of credit accounts. Debt consolidation is the option that combines all outstanding credit into one account with a low-interest rate that helps people reduce payments and become debt free in an efficient manner. People who use the proceeds from personal loans to pay off their credit cards have few benefits such as having only one monthly payment and a loan interest rate that is much lower than the average interest rate of all the cards.

Applying For a Personal Loan

There are two primary types of personal loans and these are the unsecured and secured loans. Normally, people go for unsecured loans because they no longer need to provide collateral in order to borrow. Unsecured loans do not have any collateral tied to the contract and this type of loan will be hard to get for those who do not have a credit history or to those who have had issues when it comes to paying debts in the past or those who have a low credit score. On the contrary, secured loans happen when an individual will put up his or her personal asset or property as collateral on the debt. Assets such as an automobile or a home. If he or she fails to keep up with the payments, the assets can be seized and will be sold in order to regain the money that was lent.

If you are considering to apply for a personal loan, it is much simpler than you expect. All you have to do is to check if you are qualified for applying for a loan and meet all of the criteria of your bank when it comes to the application of personal loans. You have to determine a monthly installment that is suitable to your budget and ensure that you can afford it. Next is to prepare all the loan requirements that your bank requires and then you can already file your personal loan application and wait for your approval. Your chances of getting approved fast or within 24-hours will depend on the result of the credit evaluation of your bank and other aspects to consider. As soon as the bank approves your personal loan application, you will receive a phone call to finalize the details of releasing your loan proceeds. Remember that you have to pay your personal loan on time in order to protect and maintain a good credit standing.

Advantages and Benefits of Personal Loans

Whether it is for a home renovation, starting a new business venture, or paying for your child’s education, a personal loan is the most cost-effective and simple process to acquire the additional cash that meets your needs. Applying for a personal loan have benefits that you can take delight or pleasure in such as availing goods and services that are only accessible in cash and getting huge discounts on goods and services that you pay in cash. Personal loan is the easiest way to stay in control of your finances because of its fixed term that allows you to know how many payments you have to make to pay off your loan, fixed interest rate throughout the loan tenure and a monthly installment that will never change, monthly principal payments that ensures your outstanding loan to constantly diminish as time goes by, and a much longer payment period that gives you flexibility and time to squeeze in your monthly installment into your budget.

As a private loan, it can also be taken out to consolidate a number of different loans into one and that method is referred to as a debt consolidation mortgage. Minor loans, credit card deficits, payday loans, and overdrafts can charge excessive rates of interest. Consolidating it all into one mortgage together with the bank can be a whole lot cheaper. Personal loans actually have a shorter time period in comparison to a mortgage. For instance, instead of paying above ten to thirty years, your month-to-month installment will span from one to five years only. In addition to this, personal loans help improve your credit score especially if you have exact types of existing credit. It has the ability to lower the amount of total credit that you are using in comparison to the credit limit. It is useful when it comes to improving credit score for it increases the entire amount that is available to use.

A personal loan can be used for a variety of purposes whether you are using it to pay for your finances in college or to fund something that matters to you. Students can choose a personal loan that will help satisfy their needs. Personal loans can be a financial relief specifically to students since it helps refinance student loans. For instance, a person’s student loan interest rate can be almost 7% or higher and this will depend on the kind of loan that he or she has. However, he or she can get a personal loan with a much lower interest rate that allows students to pay off loans quicker.

Last but not least, it builds an emergency fund. Once you have selected your personal loan wisely, you now have the freedom to use it as long as it will be borrowed responsibly and for a legal reason. Personal loans are useful during the right circumstances and it is the solution that many people are looking for when it comes to cost-effectiveness. It is important for you to have a clear plan of your personal loan, budget wisely, and to consult with a bank that has a notable reputation then you can start weighing your options and making the right choices.


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