Personal loans are essentially a type of installment lending. Unlike a traditional credit card, such a loan offers borrowers a one-time, one-shot payment of money. In this case, the borrower pays back that money plus a certain amount of interest over the life of the loan, called its term. Unlike credit cards, personal loans can be applied for online.
There are many types of personal loans, and each offers different terms and interest rates. You can get personal loans with flexible terms and low interest rates, which are sometimes referred to as variable aprs. For instance, if you need some emergency funds to pay for medical bills or overdue utility bills, an adjustable APR is a good choice. If your credit score is low, however, you may not qualify for a variable APR loan.
Another type of personal loans is a multiple lender loan, also known as a co-signer loan. If you’re going to apply for such a loan, you must be the named signor on the personal loans. This means that any lender can put a signature on your behalf, agreeing to back the borrower’s obligation to repay the lender. Multiple lender loans have relatively low interest rates and flexible terms, but this arrangement comes with risks; if you fail to repay the lender, he could file a foreclosure action against you.
Many people make use of personal loans to consolidate debt or meet other financial obligations. Whether you need to consolidate debts, make home improvements or pay off medical bills, a personal loan can help you achieve your goals. You can use a personal loan to consolidate several loans into one. If you have an older car, for example, you can take out a personal loan to purchase a used vehicle. Once the loan has been paid off, you can refinance your old car to get a better rate. You can even consolidate several credit cards into one monthly payment.
Personal loans can come from a variety of sources, including banks, credit unions, commercial lenders and nongovernmental organizations. Banks are perhaps the largest private lender, but they don’t usually make personal loans. Credit Unions is often another viable option, as many credit unions are now issuing credit cards. Commercial lenders offer a range of personal loans, such as corporate finance and business lending. Finally, nongovernmental organizations such as churches, schools and charities can obtain funds through nonprofit credit unions.
If you’re considering applying for personal loans, be sure to carefully consider your options. Consider how much money you need to borrow, what interest rates you can afford to pay, your level of borrowing risk (whether you’re a high-risk borrower or not), whether you’re looking at a fixed interest rate or an adjustable rate, and what your overall credit score is. Your credit score is important because lenders use it to determine your credit worthiness. If you have poor credit, you can still apply for a personal loan, but the interest rates will be higher than if you had excellent credit.