A Quick Guide About Personal Loans

Posted by Divya on September 26th, 2019

Nowadays we all need extra funds to plan out a lavish holiday or to buy the latest smartphone, everything cost high these days and with changing trends day by day we want to spend on maintaining our lifestyle.

What are personal loans?

Loans are taken for our personal needs, such as buying a car, decorating the house or for education and marriage. Usually, the interest rates for such loans are from 12 to 22 % p.a.

But what are low-interest personal loans?

With an interest rate below 12%, the low-interest personal loan usually cost less than personal loans. To get approved for any loan you need a good credit score of 720 and above. Once you borrow the money, you have to pay back the amount on a monthly or yearly basis with interest.

But how is interest rate determined?

It’s determined after an analysis of your financial history and current financial status. All lenders are interested in knowing whether you will be able to pay back the money and thus your credit score, credit report, income ratio and qualification are a reflection of it.

The plus side

With short duration assigned to the repayment of the loan, you can end up saving a lot. It’s an easy process where every formality is done online, from applying for a loan to approval. Everything is easy and involves only a few steps. Repaying these loans comes along with some flexibility. You along with your lenders can decide terms of the contract.

The minus side

Penalty or not, you need to check with your lender about prepayment penalties. Always check for lender certification as well as their authenticity. The lender should also check the borrower's identity. If you have a bad credit score, you won’t be able to apply for a loan.

So, after balancing their pros and cons, these loans have many options to explore;

Peer to peer lending is a process which has created a lot of buzz in the financial market. It is an online portal where borrowers and lenders can connect. The process works in such a way that an individual who wants to borrow money and lenders who are interested in investing & earning returns lends them online through a P2P lending platform. Though some lenders allow you to secure your loans especially personal loans in exchange of keeping collateral as security, these are known to be as secure loan providers.

If you are looking for more online loan providers go for online lenders, they can provide you with a variety of personal loan options to look for. They work entirely upon your credit scores; maximum score means maximum investors for you which means low-interest rate.

Credit unions usually transfer their profits to their consumers through interest rates and minimum to no fees structure. They don’t have any kind of shareholders. You will have to explore your options while taking up the loan since not all are open to the public at large.

So how does such scheme work? 

Your credit score defines whether or not you will be approved. You can apply online or in-person for a loan.

After reading the terms and conditions, submit your application which requires filling personal details and uploading documents which will be thoroughly checked. Once approved your loan will be in your pocket, you will then have to keep repaying monthly basis until paid off.

A low-interest loan can surely benefit you if it matches your need of the hour.