What
is a loan?
Sometimes
we face a situation where our finances are not enough to fulfil the
demand for our needs and this is where we require a loan. Loans can
be in the form of money, property, and material exchanged for future
repayment along with finance charges. It is time-bound and issued by
banks or any other financial institution. The term of the loan is
decided among lenders and borrowers; they together decided monthly
instalments as well.
What
are personal loans?
Easy
loans also make it possible to maintain our admired lifestyle. We
often need money to buy different gadgets or for various other
necessary household or personal expenses. Mostly these loans are not
backed up by any collateral which makes it difficult for the lender
to recover funds if the borrower fails to payback.
Types
of personal loans
Unsecured
loans –
These are the most common loans which are preferred by people, here
you don’t need to submit any kind of collateral in exchange for the
loan. The rate of interest that you will receive in such loans is
based mostly on your credit score. Payback can range from 1 to 7
years.
Secured
loans –
These kinds of loans are beneficial to the lender as well, here you
have to submit collateral in exchange of the loan. If you are unable
to pay back the lender, your asset might be seized. These may include
car loans, house loans etc. Rates are usually low thus these are less
risky.
Fixed-rate
loans-
these kinds of personal loans carry fixed rates, which indicate that
the rate of interest and monthly payments are fixed and remain the
same throughout. It helps in maintaining the budget as you know the
amount that will be deducted.
Co-signs
loans-
If you have no credit history then these kinds of loans can be
helpful to you. Here you have to co-sign a person along with you, the
one with good credit history, and is willing to pay in case you fail
to do so. Co-signing the person helps in improving your chances of
qualifying for a loan and also benefits you by getting you
low-interest rate. The only difficulty that you can encounter is
finding that person with good score willing to take the risk with
you. They are beneficial especially when you have to pay for any
on-going debts.
Debt
consolidation loan –
These loans combine all of your multiples debt into one new loan. The
debt repayment is done monthly. It simplifies your debt-paying
process.
A
personal line of credit –
Similar to the credit card process here instead of receiving one huge
amount at one time, you can borrow on your on the basis of your needs
and pay for it later.
Peer
to peer lending –
An online platform which connects borrowers & lenders together
and makes the process of acquiring a loan easier. It’s a direct
lending process where middle man is cut down and borrowers &
lenders can directly contact each other. This alternative source of
finance is operated online and provides unsecured loans.
P2p
loans- the borrower side
Often we
need money for an emergency and P2P platforms are a great saviour to
acquire quick loans without facing any hassles. All you have to do is
submit your application online with your requirements. Keep your
documents handy so that when a lender contacts, you should be ready.
Once verified and credit score checked your loan will be approved
which means an instant solution to your problem. Borrowing from such
a platform can be a good idea if you understand its risk. Lenders
sometimes can charge you with prepayment penalties if you decide to
go for paying back before decided period.
Summarizing
Personal
loans
benefit you by providing a higher return and being easily accessible
than the financial institution. They come with a low-interest rate
due to competition among lenders.
