Personal loans are loans that are given to an individual or a group for personal use. There are several types of personal loans such as convertible loan, fixed-rate loan, secured loan, single payment loan and installment loans. Each type of personal loan serves a particular purpose and therefore it is important for the borrower to understand the terms of payment before applying for one.
Getting a personal loan is a long procedure that requires the borrower to have adequate information from the bank or other lenders. Individual are advised to conduct preliminary research before taking any kind of a personal loan. They should start by ensuring that their bank statement is pleasant and appealing to the lenders to guarantee a loan award. They need to scrutinize the bank statement by looking at any problem such as outstanding debt or misinformation in the credit report and rectify them.
A good credit report will enable customer to get high rating in terms of qualification for a personal loan. Once the bank report is outstanding, the borrower should go on a shopping spree, evaluate and compare lenders in the market before settling on one. Here are some of the ways that someone can use to get a loan.
1. Through Credit cards
One can get a personal finance through credit cards. It is the easiest and the most common way that people use to get personal loans. However, the borrowers need to make sure that they settle the debts on the agreed date in order to evade an increased interest rate.
2. Through Social lending
Social lending is a means of getting a personal loan through the help of your peers. It is sometimes called peer to peer lending. However, your qualification is still determined by your credit card performance.
3. Through the Banks
The other way of getting a personal loan is through banks, a credit union or other financial institutions. The borrower might acquire a loan quicker and enjoy favorable interest rates if he or she has good relationship with the lending body. One can opt for a secured loan or an unsecured loan, depending on his credit report. A secured loan will require the borrower to offer some assert or property as collateral to guarantee repayment. If the borrower fails to repay the loan, the lender takes the property. While unsecured loan, sometimes called signature loans, has no collateral. The borrower’s high credit worthiness is what is used to secure this kind of a loan. The loan however has a higher interest rate because it is a big risk to the lender. Credit cards are one example of unsecured loan.
4. Through Payday lenders
This mostly used by people who have bad credit record and would wish to get a loan faster. Payday lenders will always provide you with quick cash even if you have no credit. Sometimes called Cash Advance, it is one of the most expensive loans as the lenders charge very high interest rates with excessive fees. The loan is short term and is secured by your next paycheck. It is major uses is for emergencies.
There are many other ways that someone can acquire personal loans including family, Saccos etc.