One most important characteristic of personal loan is that collateral cannot secure it. Collateral means valuable such as boat, car, or home which can be reclaimed by lender if account is not repaid. Personal loans are also known as unsecured or signature loans as it can be backed on repay. They have fixed term of one to five years and interest rate, and signature loans may vary from $1,000 to $50,000.
First, the lender would receive your application in order to verify debts and income. It would affect the amount which lender may provide you in advance and time period for which the money has been lent. Lender may make a report of credit to check for score and provide you with a credit grade. Depending on this grade, amount of loan, time period, the rate of personal loan may vary from 6 to 36 percent.
Fundamentals of a Personal Loan
Signature Loans are unsecured which means that loans do not need collateral as benefit. In case, if you fail to pay personal loan, lender may not be able to take your property as the payment of loan. This is the main reason why it is difficult to obtain signature loans. Lender may take various actions for collection as he may not take your car or house automatically. It may involve hiring of collection agency, reporting of late payments to credit bureaus, and filing of suit.
The better the score of credit better will be the amount obtained for personal loans. Some of the banks have low cap over the amount that can be borrowed. For an example, maximum amount of personal loan obtain is $1000. Rate of interest is fixed for the time period of loan. Just as loan amount, rate of interest for personal loan is based upon credit rating. It decreases with increasing credit score. Low rate of interest is an ideal quality; means low cost is paid for obtaining loan. Time period of loan is stated in months as 12, 24, 36, 48 & 60. Period of long repayment lowers the repayment of monthly loan. Rate of interest of yours needs to be linked to period of repayment.
How Can You Apply?
It is easy to take loan from bank in which you have an account. Bank may ask you the purpose of taking loan and may provide you with better loans according to needs.
Unsecured loans may be used for many purposes from funding investments or financing big- ticket to consolidating debt. Interest rate of signature loans is much less compared to credit cards; unsecured loans help in making easy budget with schedule of unchanging payment and fixed rates. Signature loan are unsecured means that lender will not be able to reclaim your property in case of undue balance. Personal loans are much safer than credit cards as their interest rate is fixed along with schedule of definite payment, balance of signature loan cannot be scampered again. They may improve the credit rating, as system of scoring credit treat debt of installment more favorably in comparison to revolving debt such as credit cards.