Many people go through a financial low where they have little or no money left to look after the daily needs, mostly they borrow money from credit cards but that may not be the best solution to your money woes. There are many companies like Albuquerque credit repair company which provide personal loans which are more suited to your needs. Debt.org says that many businesses are now offering personal loans apart from traditional loans to give more time for their clients to repay the loan.
There are differences between various loans and knowing them is essential to pick the right loan based on your needs.
What is a personal loan
A typical tradition loan is taken for a particular purpose, and that purpose needs to be put down in the paper along with showing proof that you have used it for that very same purpose. A traditional loan is a secured loan for the credit company as you have to put some collateral like a house, car or any property so that you get the loan. In case of defaulting on the loan, the lender can use possess the property from you. The advantage of ‘secured loan’ is that you can get a lower interest rate.
A personal loan is disbursed based on your income; the loan amount is based on your credit score and how much money you can pay back. The final amount and the interest rate that the bank approves to you will be based on various parameters like income, your credit history, etc. The advantage of this loan is that the money can be used for personal purposes and you need not reveal the reason for the same.
Advantages of personal loan
Quick disbursal of loan: The approval of secured loans involves a lot of paperwork, and hence disbursal of loans is not quick. But, the turnaround time for a personal loan is speedy, some even advertise same day service or next business day approval.
You can consolidate debt: If you are currently confused with all the loans that you have to pay and missing out on payments due to this, you can take a personal loan, the amount of the other loans and consolidate all the debts and make payments for a single loan. The rate of interest on a personal loan is much lower when you show good credit history.
Peer-Peer lending: Some people are not too keen on taking loans from banks as they do not trust them. The alternate option is peer-peer lending. It is a relatively new concept, instead of borrowing from a bank, there are some companies which have investors who give money to borrowers. These investors can be individuals or companies; the downside is that they charge a fee after the loan is cleared.
When to go for personal loan
If your credit history is excellent and you can get a low-interest rate.
If you have debts with high-interest rate, you can consolidate and take a single personal loan with lower interest rate.
The repayment period you are comfortable with is more than a few years.