Benefits of Personal Loans
Credit cards have been the primary choice of credit for consumers in America over the past several decades. However, as of 2015 onwards, there is a growing trend of more and more Americans opting for personal loans to meet their short-term cash requirements. This has been attributed to the fact that personal loans often offer better interest rates and other terms as compared to credit card loan products. Also, since the costs associated with personal loans are revealed upfront to the borrower it becomes relatively easier for him/her to repay it than credit card loans.
Reasons for taking out a Personal Loan
Personal loans are those kinds of loans where a borrower can get a loan without putting up collateral or security against the loan. Personal loans are thus unsecured loans.
Collateral is an item of some value that a borrower will provide to the lender at the time of taking out the loan. The collateral may be sold off by the lender if the borrower is not able to repay the loan or if he/she defaults on the loan. For example, an auto loan is an ideal example of a collateral secured loan. The lender can attach the car and sell it off to recover the money in case of default. Furniture or jewelry purchased on credit can also be considered collateral based loans as such purchases are tied to a specific item of value, i.e., furniture or jewelry. Such collateral based loans are known as secured loans.
Personal loans being unsecured loans are not connected to an item of value. Hence, lenders of personal loans typically check the income history, bank statements, and credit score, etc., of an individual before approving his/her application for an unsecured personal loan. Consumers who go for personal loans have to sign the agreement which mentions the schedule of loan repayment. Also, the loan has to be repaid completely within the time frame specified in the contract through bi-weekly, weekly, or monthly payments. If the personal loan is of a small amount, then the repayment can be made at one single go.
Eligibility criteria for personal loans
Unsecured personal loans are usually taken out by customers to cover sudden unexpected expenses, especially if they do not have enough savings or do not have access to other types of credit. Personal loans are available for borrowers from all walks of life with different credit histories and income levels. You can visit the website of the lender and fill a simple application form to be able to avail of a personal loan.
Listed below are a few criteria needed to qualify for personal loans:
- You must live in a state where the lender is licensed to operate
- You must be 18 years old or older
- You must have a bank account with electronic funds transfer facility. The personal loan funds are transferred to this account after the loan is approved by the lender.
- You must have a valid email address and a working phone number. These contact options are used by the lender to communicate the status of loan approval and other details.