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PERSONAL LOANS

Personal loans are loans that a bank or other lender makes that are not secured against any asset such as your property. They’re also known as unsecured loans. Personal loan, a loan to meet your current financial needs.. It is usually taken by borrowers who are looking for quick and easy loans with manageable interest rate and minimum documentation. You can use a personal loan as per your convenience without being monitored for the actual end usage.Should you go for a personal loan? The answer depends on your circumstances. If you have a pressing need for cash, and don’t have any assets, but own a credit card, a personal loan is certainly advisable. This is because cash withdrawal using your card is far more expensive than a personal loan. But if you have assets like property, gold or shares, it is advisable to take a loan against these assets since these loans have lower interest rates.Need money in a hurry without having to go through tedious documentation processing? Want cash to fulfill your need without having to explain the reason for obtaining the loan? Then personal loans are your best ally. You can get them easily in a period as short as 24 hours. All that is needed is to fill out an application form with the lender and the cheque would be delivered to your doorstep within a few days. In some case, the amount may also be credited to your bank account (if you hold savings account with the lender). However before you rush out to get a personal loan, it is important for you to understand the pros and cons of personal loan, in order to make an informed decision.

Some of the benefits of a personal loan may include:You may be able to borrow more than with a credit card,Your personal loan repayments may be fixed amounts. That means your repayment amount is going to be the same every month and it’s easier to budget.The interest rate you pay on a personal loan is also usually fixed (but not always). You can choose how long you’d like to take to repay the loan. Remember the length of a loan will affect the amount you are charged in interest.

You can consolidate several debts into one personal loan, potentially reducing your monthly repayment costs. But be careful, as this may mean extending the length of the loan and so paying more overall.And apparently, there have been plenty of those.The number of people taking out unsecured loans jumped close to 30 percent in recent years, to 13.72 million in 2015 from 10.57 million in 2013, according to the latest data available from TransUnion. Another 24 million Americans are likely to take out a personal loan this year alone, according to a separate report by Bankrate. The personal loan companies have a simple plan. First, they have created a low-cost operating model. These are digital businesses that have redesigned and automated much of the lending and customer service model.

Second, most of these businesses are creating marketplaces. The goal of these marketplaces is to connect borrowers with investors. The lending companies make money on the origination and the servicing. As a result, they are able to find an equilibrium price that offers a much higher return for the investors, and a much lower interest rate for the borrowers. For example, Lending Club claims to reduce the average interest rate of a credit card refinance by 31%.

And finally, they have been designed to be the opposite of credit card lending. You can find out your approved loan amount and interest rate without having a hard pull on your credit bureau. They are very open with their credit criteria and pricing models. Whereas banks build heavily guarded fortresses of underwriting rules, pricing models and punitive fees, these personal loan companies are opting for complete transparency.You can make over-payments or pay off a personal loan in full before the end of your agreement without penalty.

However if you repay more than £8,000 in any 12-month period the lender may charge compensation (although the amount the lender can charge is limited by law).

Where there are pros there are cons too and some of these include:Personal loans have higher rates of interest than some other forms of borrowing,Older loans normally have an early repayment charge if you want to pay off your loan early or overpay etc.

Should you go for it?

The answer depends on your circumstances. If you have a pressing need for cash, and don’t have any assets, but own a credit card, a personal loan is certainly advisable. This is because cash withdrawal using your card is far more expensive than a personal loan. But if you have assets like property, gold or shares, it is advisable to take a loan against these assets, since these loans have lower interest rates. Also take into account your income, your other liabilities like home loan, other bills, and miscellaneous expenses. Also ensure you are able to honour your commitment, since failure to repay the loan will not only affect your credit rating but will also land you in legal trouble. Lastly, decide if you can do away with the loan. While this loan may be useful in certain instances like medical emergencies, it doesn’t make sense if you are using it to fund your vacations. Hence it very important for you to weigh the pros and cons before apply for a personal loan.