Basic Facts About Personal Loans

Personal loans are typically general purpose loans that can be borrowed from a bank or financial institution. As the term indicates, the loan amount can be used at the borrower’s discretion for ‘personal’ use such as meeting an unexpected expenditure like hospital expenses, home improvement or repairs, consolidating debt etc. or even for expenses such as educational or going on a holiday. However besides the fact that these are quite difficult to obtain without meeting pre-requisite qualifications, there are some other important factors to know about personal loans.

1. They are unsecured – which means that the borrower is not required to put up an asset as collateral upfront to receive the loan. This is one of many reasons why a personal loan is difficult to obtain because the lender cannot automatically lay claim to property or any other asset in case of default by the borrower. However, a lender can take other action like filing a lawsuit or hiring a collection agency which in many cases uses intimidating tactics like constant harassment although these are strictly illegal.

2. Loan amounts are fixed – personal loans are fixed amounts based on the lender’s income, borrowing history and credit rating. Some banks however have pre-fixed amounts as personal loans.

3. Interest rates are fixed – the interest rates do not change for the duration of the loan. However, like the pre-fixed loan amounts, interest rates are based largely on credit rating. So, the better the rating the lower the interest rate. Some loans have variable interest rates, which can be a drawback factor as payments can likely fluctuate with changes in interest rates making it difficult to manage payouts.

4. Repayment periods are fixed – personal loan repayments are scheduled over fixed periods ranging from as little as 6 to 12 months for smaller amounts and as long as 5 to 10 years for larger amounts. While this may mean smaller monthly payouts, longer repayment periods automatically mean that interest payouts are more when compared to shorter loan repayment periods. In some cases, foreclosure of loans comes with a pre-payment penalty fee.

5. Affects credit scores – lenders report loan account details to credit bureaus that monitor credit ratings. In case of default on monthly payments, credit ratings can be affected reducing the chances of obtaining future loans or applying for credit cards etc.

6. Beware of lenders who approve loans even with a bad credit history – many such instances have proven to be scams where people with a bad credit history are persuaded to pay upfront commissions through wire transfer or cash deposit to secure the loan and who are left with nothing in return.

Personal Loan Insurance – Should You Consider?

I have had an experienced cash crisis recently. I was thinking to borrow some money then from a friend or relative of mine, but I dropped that idea. I seldom request anybody to lend me money or any thing like this. Cash withdrawal from credit card could have been a better option instead. However, I instantly dropped that idea too as borrowing charges from credit cards were high enough because of high rate of interest (normally up to 3% a month) after expiration of a fixed period, say 50 days. Finally I’ve decided to go for a personal loan because it was fast in approval and hassle free.

A personal loan is a great option to have your funds for consolidating your debt and you can take personal loan to further your higher education, repairing your car, or even taking up a vacation.

You may know that personal loans, just like credit cards, can be secured or unsecured. Secured loans are often much riskier because you may have to ensure the repayment of the loan by providing the lender with collateral security. If anyhow you fail to meet that repayment, the lender will legally repossess your property, vehicle, or what ever asset you used to secure the loan.

But don’t be worried thinking about the failure. Personal loan is still a better option and offer plenty of opportunity for individuals to improve their overall financial condition. But you should develop a habit of good money management skills. However, certain inevitable incidents in life can changed everything and you may not have control over those things such as unexpected death of the lender, loss of employment, or becoming a disable person.

Skipping the first issue of unexpected death of creditor, rest of the things can affect our ability to repay the personal loan. If that loan is of a secured type, you may lose your asset as well, being a collateral security.

Now to protect yourself against all those probabilities, you should consider purchasing a personal loan insurance. Being an insurance guy,I would suggest you to actively consider the insurance option.

I personally feel that personal loan insurance is the best protection you ever have for repayment of the loan and ensures you to have a peace of mind during the repayment term if opting for a secured one. The cost of such insurance, however varies and is generally determined by the outstanding balance of your loan amount. The type of personal loan insurance coverage will also affect the premium too.

There are three types of personal loan insurance coverage to choose. For Americans, the specific dollar amount of coverage will depend on the laws in your State and the dollar amount of your loan. But I always suggest you to discuss the matter regarding your personal loan insurance with your lender.

Personal loan death insurance will pay up to a certain dollar amount in the event of death of one of the individuals on the loan. In that case, the nominated person on the policy will be paid in full up to the maximum dollar amount or assured amount. Personal loans generally have a maximum loan amount of $15,000 in the USA.However it is not uncommon for individuals to take out more than that.

Disability Plus personal loan coverage is such type of coverage that most often be purchased for personal loan protection. It will pay you the monthly personal loan repayments(EMI) up to a certain dollar amount. Additionally you will receive a cash payment for a percentage of your loan amount each month to help you with the cost of living expenses.

Involuntary Unemployment Coverage Insurance for personal loans is very popular. This type of insurance will pay you up to a certain dollar amount per month in case your are being laid off.

You may be aware of the fact that personal loan is a great financial tool when you use it properly. Personal loan insurance is a very reliable option to help you ensure to continue your repayments regardless of medical issues, unemployment, or death. And this type of insurance is especially important for individuals with a secured personal loan. Not having a personal loan insurance will create a kind of situation where, not only your credit score will be negatively impacted, you would be end up losing your valuable collateral assets that are tied to your personal loan.

You’ll be happy to know that personal loan insurance is very affordable and can often be purchased through the lender. It is important that you educate yourself properly and inquire about it while you’re looking for such personal loans. Most lenders are readily available and more than happy to discuss about this option with you as it further assures them that they will receive the refund.

$5,000 Personal Loans With Bad Credit: The Simple Route To Loan Approval

Getting access to cash loans when most needed is not a new phenomenon, but in recent years the number of people in need of financial resuscitation has grown dramatically. The good news is that the chances of securing even a $5,000 personal loan with bad credit are better than ever.

Traditionally, a low credit score would seriously impede the chances of getting loan approval, but the growth of the online lending industry means there is now a wealth of lenders offering more affordable terms to bad credit borrowers – including fast loan approval.

Why is this the case? Well, it comes down to the fact that the key to getting any lender to grant a personal loan is to convince them that repayments will be made on time every time. There are several ways to accomplish this.

The Issue of Loan Approval

So, why would any lender be willing to grant a $5,000 personal loan with bad credit? Well, thankfully the approval process for any loan is standardized so that as long as the right boxes are ticked, there is no reason for a lender to reject the application.

This essentially means that approval is always possible as long as the set criteria and any additional conditions are met. Of course, when the sum of money applied for is relatively low (like $5,000) this is more easily achieved, and fast loan approval is well within reach. But larger sums are more challenging to secure.

The steps needed to build lender confidence are pretty straightforward, and really come down to addressing the usually problems with an application – for example, proving that repayments on the personal loan are affordable, and that there is a commitment to make the repayments on time.

Making The Loan Is Affordable

Affordability is the magic word when seeking loan approval. No lender, even for a small sum of $100, will give the green light if the applicant has no way of repaying it. So, getting a $5,000 personal loan with bad credit is dependent on proving repayments are possible over the full term of the loan.

There are ways to ensure affordability. For example, seek a longer loan term to ensure the monthly repayments are less. If a $5,000 loan is repaid over 2 years, the monthly repayments are usually around $225. But over 5 years, the same loan would cost just $90.

Getting fast loan approval is most likely when the sum to be repaid falls well within the 40% limit set by the debt-to-income ratio. The ratio stipulates that no more than 40% of available income can be used to repay any new personal loan – and it is likely that $90 will meet that condition easily.

The Criteria Applicants Must Meet

Of course, getting to the stage of proving affordability can only come after the basic loan criteria are satisfied. Even when applying to online lenders, these criteria are the normal set covering age, nationality and employment status. Applicants for a $5,000 personal loan, with bad credit or not, must meet these 3 criteria.

First of all, the applicant must be over the age of 18; secondly, the applicant must either be a US citizen or be a legal long-term resident; and finally, the applicant must be gainfully employed in a full-time job.

A fourth condition relates to having a bank account, thus allowing for fast loan approval and easy funds transfer. It also means the lender can arrange to have repayments made automatically from your account every month, thus reducing h possibility of missing any personal loan repayments.