Five things you should know about personal loans

Almost everyone needs money at some point — for a variety of reasons. At that time, you can get loans from different sources. Renowned companies like sfgate.com can help you find the most appropriate source of funding for your needs. Whether you need to fix your car, take a vacation or pay for home repairs, personal loans can be an affordable way to get the cash you need. Personal loans come in two general varieties: secured and unsecured.

An unsecured personal loan is based solely on a borrower’s creditworthiness. If you secure a personal loan, the lender will require you to use your car or another asset as collateral. Therefore, this is a key factor to consider when applying for personal loan.

Secured loans tend to have lower interest rates than unsecured personal loans. This is so because the collateral gives the lender added assurance that he will get his money back. However, before applying for either type of loan, it is important to understand the terms and conditions.

Information about personal loans

 If you have exhausted all other options for financing an expensive purchase, you may be able to get a personal loan. These short-term loans typically have lower interest rates than credit cards or other forms of lending options. With a personal loan, you can make the purchases you need and pay for them over time instead of all at once.

Here are five things you should know about personal loans.

1. You can get a personal loan for any use!

You can use a personal loan for almost anything. However, they are often used to consolidate high-interest debt like credit cards or auto loans or for heavy expenses. You can use it to make home repairs, finance a vacation, or purchase big-ticket items such as an engagement ring or a computer.

2. There are limits to the amount you can borrow  

You can generally borrow anywhere from $1,000 to $50,000. However, this depends on the lender and the purpose of your loan. If you need a loan for more than five years or want larger amounts of money, you can explore other options. Your best bet is to opt for a personal line of credit instead of a personal loan.

With a personal line of credit, you can borrow whenever you need money for up to an agreed-upon limit. Then you pay down your balance when you have the money.

3. Interest rates on personal loans are generally high but fixed

Personal loan interest remains the same throughout the life of your loan. That makes it easier to predict how much you will ultimately pay. However, it is important to note that interest rates are usually higher than those of conventional banks.

4. Getting a personal loan from a bank or credit union is difficult

It is not easy to get a personal loan from conventional banking institutions. However, you can easily do so from payday advance lenders, charge card issuers, or online lenders. Banks are conservative. Therefore, they generally do not like risking as much as the nonbank lenders do. If you go to a bank for a personal loan, make sure you have an existing relationship with it.

5. Personal loan application is swift if you meet all the requirements 

If a personal loan is the only option you got, you can get cash in a few hours. This is after you have met all the requirements and submitted your application. You must have an ID and proof of steady income to qualify. It will take less time to get the loan than with conventional lending from banks.

Important advice! 

If you have a lot of credit card debt and cannot pay it off quickly enough to avoid finance charges, consider getting a personal loan. You can do so from a bank or credit union that has a lower APR than your existing credit cards.

Final thoughts 

When you are ready to select the best personal loan for your needs, do not fall victim to preying lenders. Some would try to talk your ear off with marketing lingo and not give you any useful information. Remember: A payday lender may be able to provide you with a larger sum of money than a bank or credit union is willing. However, they also tend to charge higher fees!