Personal Loans – Unsecured Loans at Low Rates
When people require money to pay for their expenses, the mortgage on their home is usually the first option. However, there are instances where personal loans that are unsecured might be the best choice.
Maybe they require the cash quickly. Perhaps they don’t have to take out so amount. Maybe they don’t want to put their house in danger or use the equity in their home to get the sake of a loan. It could be that they don’t have home equity. Perhaps they don’t have a house at all.
Personal loans that are unsecured declined in the Great Recession but have seen an increase in recent times as lenders have been more inclined to offer loans that don’t require collateral. These loans aren’t limited to people with high incomes or good credit scores – numerous lenders will consider people with lower incomes and less credit scores, too.
When would you consider taking personal loans? Here’s a quick overview of the benefits and drawbacks:
- There is no requirement for a home equity
- There is no risk of being in foreclosure if you fail to pay back the loan
- Fast turnaround time – usually 3 to 5 days
- Application process simplified
- Rates are usually lower than credit cards.
- It can be expensive for those who have weak credit
- The borrowing limits could be less than those on the home equity loan
- Shorter repayment period
- Interest is generally not tax-deductible
In contrast to mortgages, where the lending guidelines are fairly similar, however, personal loans are across the board. Credit scores or income requirements, the minimum and maximum amounts of loans are different between lenders.
The rule of thumb is that you require adequate credit scores to qualify for an unsecured personal loan and most lending institutions require FICO scores of 700 or more for approval. But there are many lenders that have lower requirements and will approve those with scores of 600 to 640.
Similar to the income. Some lenders will require monthly earnings of more than $70,000 while other lenders will consider those with a monthly income of between $10,000 and $20,000.
Loan amounts can differ too. A majority of lenders restrict their personal loans to the $20,000 to $50,000 range, but certain lenders can go up to $100,000 for borrowers who are qualified. If you’re looking to get an individual loan that isn’t too big the minimum amount typically ranges from $1,000 to $5,000, although some lenders will let you take out as much as little as $500.
Some but not all lenders require an initial origination charge for personal loans. The fees typically range between 1-5 percent.
The process for applying is much simpler than for an equity home mortgage or loan and the processing time is also quicker. Customers seeking a quick personal loan typically get their money within three days of submitting.
The repayment terms for personal loans are usually short, typically 3 to 5 years, although some lenders can extend it for longer. There are penalties for early repayment when you pay off the loan prior to the scheduled date.
The best personal loans include a low rate of interest with no or minimal charge for origination and give you enough time to pay back the loan. Also, they should permit you to get enough cash to cover your expenses. Finding an individual loan that can meet the needs of all these areas can be difficult and it’s recommended to look at all the lenders you can prior to signing.
Personal rate of loan
The amount you can borrow and the cost you’ll be charged are dependent on your credit rating and your income. The most favorable rates for personal loans are similar to the rates you can get with a home equity loan however, they are only available to borrowers with good credit and excellent income.
Credit-worthy borrowers may be eligible, but they are expected to pay more for the loan. A single lender could have personal loan rates that vary between 6 and 36 percent, based on the borrower’s credit profile as well as the amount and length of the loan.
Personal loans that are not secured are typically offered as fixed-rate loans, where you get the funds in one lump sum, however, certain lenders provide adjustable-rate personal loans, too. Some also provide personal loans that are revolving lines of credit with a variable rate.
Personal loan for home improvement
Contrary to the home equity loan, the interest charged on personal loans typically aren’t tax-deductible. However, there is one exception however.
In many instances, you can utilize personal loans to accomplish whatever you like However, some lenders may demand that you present a plan for the use of the money, and also the loan could be limited to a particular use, like repaying credit cards.
Where can I apply
If you want to apply for personal loans You can visit nearly any credit union or bank. A lot of lenders provide personal loans online, which can save time and speeds up the process of applying for those looking for fast personal loans.
Certain lenders will only offer personal loans to their current customers, which means you will require setting up an account or undergoing a waiting time to obtain the loan they offer. However, some lenders will consider anyone who can meet their creditworthiness and other lending guidelines which allows the borrower the most affordable personal loan rates and terms.