Understanding Personal Loans
With the continuing rise in the cost of living, it will be no surprise that you may find yourself one day in a financial predicament where you will need a sizable amount cash to cover unexpected expenses such as a general repair of your home, car or any other expenses that you need to immediately address. If you don’t have enough savings and your credit card advance limit will not suffice to cover the unexpected expense, then your only recourse is to proceed to a dependable Loan Company and apply for a personal loan. If you have a stable job and a good credit standing applying for a personal loan is the quickest way to resolve your financial crisis.
A Personal loan is type of loans considered to be an unsecured debt for the simple reason that it is not secured by any kind of collateral such as a property, car or any other items deemed valuable. For a personal loan to be approved your credit standing within the community will be thoroughly scrutinized. This will also be factor on the interest rate that will be placed on your loan in the event that it is approved. However, you should expect that your personal loan will be given a higher interest rate for the simple reason it is not a secured loan. It is important therefore that you should only apply for an amount that you know you can easily manage to pay and to pay it at the soonest possible time. Also never make the mistake of comparing personal loans to credit cards which are considered to be revolving loans. Most if not all revolving loans have no fixed payment term and more often than not have fluctuating interest rate. Personal loan is a bank loan normally paid off on installment basis. Installment loans have a fixed repayment schemes which usually last from two to five years and more often than not carry a fixed interest rate. Personal loans are given to the borrower lump sum and the loan paid back along with its interest in equal numbers of months. A simple finance tip to consider when applying for a personal loan is to make sure that the loan you are applying for is based on a fixed rate agreement. The usual routine among lending companies is to provide fixed rate personal loans but there are some lending institutions that do otherwise. It is important therefore to always read the fine print of any loan contract before signing the same.
It is also important for you to understand that unlike a credit card which you can pay off over an undetermined amount of time, a personal loan needs to be paid off in specific number of months or years depending on the loan agreement. Terms for personal loans are quite specific because repayment schemes need to be followed to the letter. Paying off the whole amount before the maturity date or pre-terminating the loan is never allowed and if you do pre-terminate the loan in advance you may be charged with a specific amount of termination fee.