Personal loans are usually sanctioned by banks and other financial institutions for personal usage. They can be unsecured and can be treated as consolidation loans, depending on the use of the loaned amount. However, these are not to be confused with payday loans. They are given for shorter terms and usually, have a higher interest rate. While payday loans are ideally repaid in lump sums, personal loans can be paid for a longer duration, usually a year or more.
When borrowing money from local banks and financial institutions it is mandatory for you to have a healthy credit record. If you are one of the unfortunate blokes who has fallen victim to bad credits, you can turn to personal loans instead of credit cards. This is actually a credit building process, where the lender can submit the borrower’s payment records for credit building. So the next time you approach a bank you will have a much healthier credit record to show for.
What are the term variations you can opt for?
Housing loans, car loans, and education loans have extremely tight payment schedules and fixed (sometimes exuberant) interest rates. In most cases, consumer loans have flexible rates that are ideal for all economic situations. Since these are popular emergency loans, people prefer to pay them over a range of a year to 24 months. However, larger amounts with a term of 60 months are not unheard of.
While deciding the term most suitable for your current financial status, you may want to consult a finance expert. In reality, the shorter the term the lesser you pay. The more you extend the term the more you pay at the end of the term in interests and other fees.
Are there any hidden expenses?
Many companies now claim of giving out consumer loans (both secured and unsecured). However, many of them guise processing fees as origination fees up front. The other fees include defaulter’s fee and pre-payment fees. These are declared in fine print on the legal documents as well as on the loan websites.
Since most of the application process has shifted to online platforms you can always read their blogs and testimonials to find out client experiences. The well-known banks and companies do not imply covert charges on your loan amount.
Do consumer loans help in personal financial management?
Consumer loans can be used for various personal purposes and that includes payment of credit card bills and electricity bills. This is the basic step of debt consolidation, where you are taking out an easy loan from one source, at a fixed and affordable rate to pay off several other dues. While you pay off large debts from multiple sources using the personal loan amount using the borrowed lump sum, your credit record finally climbs up. You can pay off the personal loan amount slowly and steadily over pre-designated months. This helps the borrower to define a budget and stick to it as well.
Author Bio: Steven Martin is a prolific writer and financial advisor who hold conferences all over the country regarding the nebulous credit card debts almost everyone faces today. His work on defining the terms of ideal personal loans is amazing and well-suited for every citizen of the country.