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Publish Date - May 11, 2022

Author: Clinton Sheffield

Categories:   Auto Loans & Financing    Consumer Credit   

A Quick Guide To Personal Loans

Personal loans can be an ideal choice for individuals that have poor credit scores. This is because they have the option of using collateral as a security deposit rather than carrying out a comprehensive background check.

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Personal loans can be an ideal choice for individuals that have poor credit scores. This is because they have the option of using collateral as a security deposit rather than carrying out a comprehensive background check.

If you have found yourself struggling to make ends meet consistently, then it could be time to challenge yourself and take a closer look at your personal finances. Consider setting a comprehensive budget, or applying for a personal loan.

These loans encourage you to access the available resources to figure out how you can manage your money a little more successfully in the future.

This is a look into personal loans, and what they could do for you. Check out bad credit loans in Lexington KY for more detail.

What Are Personal Loans?

Personal loans are intended to provide relatively short-term access to a pre-agreed amount for a range of purposes. They can help individuals in times of need to have more peace of mind in the long run.

A personal loan works by applying for the amount that you need and giving a brief summary of what type of thing the money is needed for. This could be help paying your bills during an especially challenging month, paying a deposit on your wedding, or more urgent situations.

Once the application has been received, it can take several hours to days to approve. The wait time typically depends on the amount requested and whether you have made any errors in the application form.

The money lending institution can perform a background check if you do not have any collateral. Once this has been done, you will be approved or denied based on the details provided. Then, you will be able to access the money within twenty-four hours.

Because more services are available online nowadays, the personal loan application process can be significantly faster than it once was. Smaller personal loans are likely to be approved and accessible within twenty-four hours in total.

Uses Of A Personal Loan

Personal loans are ideal solutions for a range of issues. These include consolidating your debts so that you only need to focus on one form of repayment instead of multiple. Over time, this can allow you to build a credit profile and increase your credit score. This will open all kinds of doors for you in the future.

Other uses for personal loans include funding larger purchases. For example, you could take out an auto loan or mortgage to help you pay off any extended payments. Personal loans are less specific, which allows you to use it for a range of purchases like furniture for your home.

Emergency situations are also much more challenging when you find yourself struggling to pay for necessities. Because personal loans do not take much time to approve, they could allow you to pay for emergency medical treatment or lifesaving surgery.

It can be useful to know that personal loans are available for these instances, because you will not need to have additional stress caused by lack of funds and needing money fast.

Secured Vs Unsecured

Secured

Personal loans that are secured do not require credit checks. This can contribute to a faster response time and more consistent approval rates in the long run. Using collateral as a security deposit is a good way of getting a loan if you have bad credit history. However, it can be a little risky.

Because secured loans use possessions to fall back on if you fail to meet the repayment terms, the amount that you can get with a personal loan is limited to the estimated value of a particular item. It can also pose a risk to certain items such as your home, family heirlooms, or vehicle.

When you are looking to take out a secured personal loan, make sure you can actually live without the possessions in question before applying. You do not want to be left homeless if you default on repayments.

Unsecured

In comparison, unsecured loans are considered to pose a higher risk to the lender. This is because there is the possibility that you will not be able to make repayments within the agreed timeframe. Because of this, lenders typically take longer to approve unsecured loans.

A credit check is needed in order to apply for an unsecured loan. Those that have lower credit scores are less likely to be approved. If they are approved, the interest rates can be higher than expected.

This is because you pose more of a risk to the lender on the whole, and there is a higher uncertainty that you will repay the loan over time.

Pros And Cons Of Personal Loans

Pros

Personal loans are relatively flexible loans because they can give borrowers access to higher amounts of money when necessary. They can be used to cover a range of expenses, which is what makes them some of the most popular types of loans.

Many personal loan providers will also give their customers access to financial advisers and useful financial resources. This is so that you can become more financially aware, and avoid falling into debt on a regular basis.

Consider a personal loan as a stepping stone to better credit, and to building a more sustainable relationship with money.

Cons

When you borrow a large amount of money, personal loans can charge high interest rates. This is especially true when you have a poor credit score, or if you are unable to provide any collateral.

Consider shopping around to find the best possible deal with a high quality personal loan provider. This can allow you to avoid unnecessary costs later down the line where possible.

Summary

Personal loans have been designed to suit a range of needs, and in most cases they are an ideal choice. However, it is worth mentioning that they aren’t for everybody. For example, individuals with lower credit scores may find themselves struggling with the high interest rates. Make sure you consider the pros and cons of personal loans before applying.