According to this source, in the past year, roughly 34 percent of Americans took personal loans. That’s because a personal loan is a handy solution to numerous problems. In this post, we’ll outline the main characteristics of a personal loan, and the situations in which getting one makes sense.
First things first: what is a personal loan? A personal loan is a form of financing that you can use for a wide range of purposes; just to name a few, to consolidate debt, to pay for an unanticipated expense, to renovate your home, and the list may go on. The fact that you can take such a loan for literally any reason makes them widely popular.
Most Personal Loans Are Unsecured
As a rule of thumb, personal loans are unsecured, meaning that they don’t require you to use collateral or asset to get financing from a licensed money lender. That is to say, if it happens for you to default on the loan, then, the lender cannot automatically possess your property or a valuable asset to compensate for the loss.
Obviously, this is the primary reason why a licensed moneylender might have stricter criteria when providing this form of financing. Still, this doesn’t mean that the lender cannot take any action if you don’t make payments. On the contrary, one can report late payments to the credit bureaus, file a lawsuit or hire a collection agency.
A Fixed Amount of Money
Furthermore, personal loans facilitate a fixed amount of money, ranging from $1,000 to $50,000. The sum of money you can borrow depends on the licensed money lender’s eligibility criteria, your credit rating, and income. In simple terms, the better your credit rating and the more consistent your income is, the more money you can borrow.
Personal loans are distinct from credit cards – which are revolving loans. To be more precise, revolving loans such as credit card loans don’t have a fixed payment term, and the interest rate often fluctuates. Quite the opposite, personal loans are similar to installment loans; meaning that they have a fixed repayment term, which is typically from two to five years.
In plain English, you get the money from a licensed moneylender in Singapore such as those from www.moneylenderreview.com and, afterward, you repay the loan in regular monthly installments.
Fixed Interest Rates
Additionally, most personal loans have fixed interest rates. That is to say, the interest rates aren’t due to change over the lifespan of the loan. Similar to the amount of money you may borrow, the interest rate and the term of the loan will depend on your credit rating. As you may anticipate, the better your credit score, the more convenient the loan terms will be. It is implied that lower interest rates are more convenient.
While there are personal loans whose interest rates fluctuate, they are not as common. The main disadvantage to a variable interest rate is that the monthly repayment amount will fluctuate as well, which could make it difficult to budget.
On a final note, a personal loan can be the solution to numerous financial problems. Still, before taking one, you should ensure that you collaborate with a licensed moneylender and that the loan terms are convenient.