Dealing with finance is one of the toughest things we had to deal with. From buying a smartphone to planning an exotic holiday, everything today cost a lot. To maintain we need extra bucks to cover all our expenses. Planning a perfect wedding, buying a car, mobile phone, buying a new house or renovating an old house, debt or due credit card bills and other uncountable finances, you no longer have to compromise though, you can simply avail yourself to personal loans. They work as your friend in need.
Things to know before taking the loan
Consider all your options of borrowing before taking a loan, there are various options for you to explore. Always check for a good interest rate or any kind of penalty for advance payment. Before applying for loans always check the credibility of the lender to avoid any kind of conflict later.
The most common type of loan is an unsecured loan where borrowing money is not backed up by any kind of collateral. This makes it riskier for the lender, so they charge a high percentage rate. Approval of such loans is based only on your credit score.
On the other hand are secured loans, which are backed up by collateral, which means if you fail to pay back the lender, they can seize your security. Rates are low and are less risky for lenders. Examples of such loans are house loans or car loans.
Comes with the benefit of fixed-rate and monthly payments, fixed-rate loans come with a consistent plan throughout our loan. It makes easier to budget since you as a borrower don’t have to worry about changing payments every other month.
In variable-rate loans, the interest rate is tied by the bank or other financial institutions which means the rate of your loan, monthly payments, and interest cost can rise and fall if there is any fluctuation on the benchmark set by banks.
The next option is Debt consolidation loan, which combines all your other debts into one single new loan. The main benefit of these kinds of loans is that they simplify your debts repayments with fixed monthly instalments.
As a borrower, if you have no or low credit score, don’t sulk about not getting loan approval because Co-sign loans can help you qualify for it at the time of need. A co-signer helps you take responsibility for payback in case you are unable to do so. The only hindrance is finding an individual with a good credit score and is ready to take a risk with you.
Similar to credit cards, a Personal line of credit gives the benefit of borrowing as on a needed basis rather than taking a lump sum amount at one go. You only pay interest rates only on the amount you have access to. It is quite beneficial when you need money for any ongoing debt.
P2p lending is a kind of loan where the borrower can get in touch with the lender directly, cutting the middleman. It’s a digitalized platform where borrowing and lending of money are done online. As a borrower, you can get yourself registered with your requirements and documents to verify your profile. A lender will contact you and if your credit score is good, the loan is approved instantly.
Benefit for the borrower: while borrowing the money you receive flexible terms and conditions, they are instant and easy to apply. It reduces paperwork since this whole process is done online.
Benefit for the lender: Individuals get to know who they are lending money to and for what purpose. They work on terms of contract together thus making it a flexible process. To make the process safer, instead of investing money on one borrower you should divide among several.
P2P lending a good idea?
This process is quite simple and straight, you can borrow money directly without any interference of the middle party. Interest rate is usually on the higher side, with the feature of being instant and free from the burden of paperwork makes it beneficial for both borrowers and lenders.
Understanding the Pros and cons of personal loans
Such loans can help you by resolving ongoing debt such as huge credit card bills; they even carry a low rate. Another advantage is you can fix monthly instalments to make a budget since they are instant you will get to know whether you are approved or not quickly.
If you are using the loan to pay off other debts, you are moving from one debt to another. If your credit score is low you might not get approval. There are certain fees applicable for advance payments. And since they are mostly carried online you can even face scam in such matters if not careful.