Personal loans are unsecured loans that are not backed by collateral. They are also known as signature loans or unsecured loans. These loans are granted on the basis of the borrower’s credit rating and are more difficult to get as compared to secured loans.
Backing Of Personal Loans
The personal loan grant depends on the borrower’s income and his capacity to pay back. On the whole, this loan is considered as cheap and carries lesser risk for the borrower as compared to a secured loan.
A personal loan is not backed by any object of value and is granted solely on the basis of the good name of the borrower. This is the main reason why the interest rates levied on these loans is higher than the other kinds of secured loans.
Kinds Of Personal Loans
There are three types of unsecured loans:
• Personal unsecured loans: A loan that is the sole responsibility of the borrower. This means that the borrower, as an individual, is totally responsible for the repayment of the loan.
• Unsecured business loan: Here the business is responsible for the repayment of the loan.
• Unsecured business loans with a personal guarantee: In this kind of loan an individual would be held responsible for the repayment of the loan in case the business defaults on the loan. This individual will be the payer because it was he who had given a personal guarantee on the basis of the business’ strength.
So now you know where to turn to in case of emergency cash requirements. Whether you need money for a medical emergency or simply to pay up for a car repair bill, a personal loan would simplify it all for you. In fact most of these loans do not even ask for a credit check on the borrower. This is because of the fast nature of the personal loan approval process.
Personal loans do not take more than a day or two for approval. Again though, one must know that he cannot ask for more than $1500 as personal loan. Also, these loans are short term by nature and have to be repaid within a short duration.
Nature Of Personal Loans
Personal loans are also referred to as cash advances or payday loans. These loans are meant to be paid back within 30 days of loan approval. The loan amount usually ranges from $100 to $1500, depending upon the borrower’s income. In order to comfortably handle these loans, one must ensure that he borrows no more than what is actually required. This means that if you need $400 for your car’s repair work, then borrow only $400.
The loan amount is accompanied with a high interest rate that makes it difficult for many salaried class individuals to manage. This is the main reason why most of them have to roll over their loan. This adds to their troubles as they now have to pay a higher interest rate than earlier. So it is best if the borrower asks for a minimum amount that would bail him out of his financial turmoil. This would save him the latter trouble of paying fines and asking for extensions.
Eligibility For Personal Loans
If you feel that you can handle the loan responsibly, then here are the eligibility criteria to qualify for the loan:
• You need to be at least 18 years of age.
• You also have to be a citizen of the US and must belong to the state from where you are applying for the loan.
• Your monthly income should not be less than $1500 per month.
• You should have a valid current bank account.
• You should have been residing at the same residence for the past couple of months.
If you have all the above in place, there is nothing that can stop you from getting an approval. Just make sure that you pay the personal loan back on time.