Perhaps you need to make a pricey purchase or have to perform some repairs on your home. You may even be planning a major life event and need some extra cash or want to consolidate debt and get rid of your monthly payments on your credit card. Whatever the situation you may be in, you need a little extra money.
The million-dollar question now is how to come into that money. Do you bet in the lottery and hope to win? Do you take out a home equity loan? The answer you may be searching for may lie in taking out a personal loan.
What makes this type of loan ideal for your financial needs? Your mind may be buzzing with hundreds of questions. Fortunately, we’re here to help you understand how a personal loan works and why you may find it beneficial to apply for one.
1 - What Is a Personal Loan?
A personal loan is a type of unsecured loan that may be used for a variety of purposes. When a loan is “unsecured” it means that there is no collateral to back the loan up. A personal loan may be used to consolidate debt, pay for sudden medical expenses, pay for a home renovation project, or used for anything else.
2 - How Do I Qualify for a Personal Loan?
Qualifying for a personal loan depends on your credit score. Although there is no exact number that you need, you are looking to have a credit score anywhere from 600 to 700 to qualify for a personal loan with decent terms. The higher your credit score, the better your interest rate will be.
3 - What Documents Would I Need?
When you apply for this type of loan, you will be typically asked to present a valid ID and proof of income. These documents will help the lender verify your identity and your capacity to pay off your loan in the future.
4 - How Much Can I Borrow and for How Long?
These two factors will usually be determined by you and the loan officer when you will be working out the nitty gritty on your loan. Personal loans usually clock in anywhere from $5,000 to $15,000 which can be repaid from 24 to 60 months. Again, your credit score will determine your options when it comes to your loan terms.
5 - Why Are Interest Rates Higher on a Personal Loan?
Since a personal loan is an unsecured type of loan, there is no collateral involved. With personal loans, lenders assume the risk on your promise to pay. The interest rates on personal loans are higher for this reason. In other words, the lender is trusting your word that you will pay back your loan and in exchange, you will need to pay a higher interest rate.
There are a lot of factors to consider when you are applying for a personal loan. Asking a lot of questions before taking out a loan is a financially sound decision, after all, you would not want to get into a situation where you were not ready to face, especially in terms of your financial status. If you have more questions that were not answered in this blog post, we recommend visiting a reliable lending company. They will be able to answer all your questions and let you know of the loan products that will work best for your situation.
If you’re in need of a personal loan in Atlanta, GA, we’re the team you’re looking for. At Central Loan and Finance, we believe in the value of strong relationships, especially in times of need. Our approach to lending is through an understanding lens. You can’t always judge a book by its cover when it comes to past credit and we will never turn any applicant away. Please call to inquire about a loan today. We are eager to help.