subject: The Basics Of Personal Loans [print this page] If you are short on funds, a personal loan is one option available to you. However, this may not always be the best choice, so be sure to fully understand personal loans before taking one out.
If you have other options of getting money, you may want to explore those first. However, personal loans are a great option for thousands of people every day.
Reasons people need personal loans:
Unexpected bills
Medical expenses
Auto repairs
Urgent home repairs
There are many reasons a person may choose to get a personal loan. It is advised that you have an urgent need before taking one, but you can use the money for whatever you choose.
Personal loans are unsecured. There is no property, such as a home, offered as collateral. This is a key difference between personal loans and other types of loans.
Rates are higher. Because they are unsecured, interest rates for personal loans are higher than secured loans (such as a mortgage or home equity loan).
Still, they are lower than credit card rates -- after the credit card's initial teaser rate, that is.
They have a fixed term. A personal loan can be due at the end of a set term, in which case the interest rate is fixed.
Sometimes, a revolving line of credit is offered. Occasionally, a personal loan can also work as a revolving line of credit, like a credit card.
In such a case, the interest rate is variable.
There are no tax benefits. The interest on a personal loan is not tax deductible, unlike the interest on a mortgage or home equity loan.
If you don't own a home, or you don't have much equity in your home, a personal loan may be your best choice if you are in need of money. If you get a personal loan with a fixed rate and term, it forces you to be disciplined and pay the loan off within the specified time frame unlike a credit card, which tempts you to continue spending.
Also, the interest rate on a personal loan is usually lower than that of a credit card, although the credit card's initial teaser rate may be lower.
Disadvantages:
A personal loan has some disadvantages to consider. For example, the interest payments are not tax deductible, while the interest on a loan secured with property usually is.
Also, rates can easily be over 10 percent on a personal loan. Mortgages and home equity loans are usually closer to 6 percent.
Therefore, you end up paying far more on a personal loan than you would on a home equity loan for the same amount. Still, in some situations, a personal loan is the best option.
If that is the case for you, be sure to consider your options carefully. Compare products from several different lenders.
Different lenders have different fees for personal loans, so it is important to shop around. Use a personal loan wisely and only get one if you really need it.
Sometimes, an unsecured loan actually is your best option. If you cannot get a secured loan, an unsecured loan is probably a better choice than a credit card. It all depends on your circumstances.
Most people can qualify for cash advance personal loans as there is no credit check involved. This is a great option for people who cannot qualify for the traditional loan at the bank or credit union.
The basic requirements are that you be 18 years of age or older, have steady employment that nets you at least $1000 a month, be a resident in the country in which you are applying and have a valid bank account. Applying is quite easy and you get your money within a few short hours.
The reason to prove you have a bank account is because the loan payback from a draft to your account, or a post dated check is your collateral.
So although you do not need to put up your home or your car for collateral, you do need the bank account to ensure you can pay the loan back at the time it is due.
