A personal loan is simply a loan for which you do not have to declare the use to which you will be putting the money. They are available in a wide range of amounts, but make sure a whether it is right for you. If you just need a couple hundred bucks to pay some extra expenses, you might be better off just finding a personal loan online. If you’re looking to buy a new house, a home equity loan might be more suitable to your needs. These kinds of borrowings are ideal for large personal expenses, like buying a boat or refurnishing your home. They’re also great for consolidating your debts by borrowing enough money to pay off your existing debts and only having one bill to pay back.
You will most likely be subjected to a credit check when you apply for a personal loan. Financial institutes are fully entitled to consult a credit reporting agency, finding out what previous debts you have and how reliable you were in paying back debts from the past. They may even ask for your current income status. Of course, you are entitled to access to this information as well, so it is highly recommended that you be aware of your personal credit history before you start, as it can affect whether your loan is approved, as well as how good a loan rate you may be offered.
Credit agencies generally offer the option of taking out something called a secured personal loan. This is where the borrower guarantees the loan against some personal possession of his own, such as a house, car or other valuable property. This is termed collateral. If the borrower fails to pay back the loan, this item of collateral is claimed by the lender in exchange for the money lost. Secured loans usually come with lower loan rates because of this added security for the lender.
There are also unsecured personal loans, which require no such guarantee of personal property. These loans are easier to get if you don’t have suitable property to provide for collateral. Because of the lack of added security for the lender, an unsecured loan will normally be offered only after a much more detailed credit history check, and the interest rates generally tend to be higher than secured loans.
There are benefits to both secured and unsecured personal loans, and which one is better suited to you will depend on your own personal circumstances. Maybe your credit history is not the best, and offering your boat or house as collateral can get you a more reasonable interest rate. Maybe you don’t own any property, but your credit rating is good enough to bring your loan rate down to something you can afford. Choosing the right loan type for you can be daunting, but if you spend enough time doing the research you should be able to find the right personal loan to make your life easier.