One of the quickest ways to get money into your account is through unsecured personal loans. Unlike secured loans, this type of loans does not have security. They are issued based on one’s ability to repay which is determined by the lender.
Unsecured loans are easily accessible and can really help sort out an emergency. However, they are expensive and have high-interest rates. So here is everything you need to know about them.
Who is Eligible for a Personal Loan?
The eligibility criteria vary with different lenders based on how they perceive risks associated with the loan. However, most banks categorize potential borrowers into:
– Salaried borrowers
– Self-employed persons
– Self-employed professionals
Other factors put in consideration include age, place of work, work experience, and repayment capacity.
Medical Emergencies
You can never put a price on human life. Unfortunately, high-quality health care is not affordable and when a loved one is diagnosed with a fatal disease, people struggle to raise the expenses. In such circumstances, personal loans can really help. The good thing is that you can apply for the loan online. Moreover, you will get the money within a very short period. Actually, some lenders like Asteria Lending will deposit the funds in your account within 48 hours.
Consolidating other Cards
Using a personal loan to pay off debt that is hard to manage is a wise move. Normally, a personal loan has a low-interest rate compared to loans like a mortgage or student loan. This helps you save some dollars.
Boosts your Credit Score
First, a personal loan can improve your credit score when most of your credit report shows credit card debt. It pays to have different types of loans.
Secondly, it lowers one’s credit utilization ratio. If you are using a lower total credit, your score is better.
Investing in the stock market
Despite the fact that many have made a fortune from investing in the stock market, it is very risky. Renowned companies and brokerage firms can go bankrupt anytime. And if had invested in one of them then you will end up paying a loan that didn’t help you.
Taking a loan on behalf of a friend
Personal loans come with huge responsibility and high-interest rates. There is no single reason to take such a risk for a friend.
Illegal dealings
Lenders are very prudent as far as approval of personal loan applications is considered. In case, you use funds given to you for illegal activities and your lender discovers, they can sue you or slap you with a very heavy penalty.
How to Identify Lenders with Low-Interest Rates
First, look for banks offering personal loans and then analyze the interest rate each bank is charging. Most banks today have an online portal so, that should be easy. Remember to check for any hidden cost.
Micro-finance and government entities also offer loans with pocket-friendly interest rates.
Bottom Line
Whenever you are on the verge of taking personal loans, always ask yourself whether the loan is necessary. If your answer is yes, then it is a brilliant idea.
