Getting a personal loan during the holidays is a common practice among some people. Regardless on the amount of bonuses that they normally get, there are times where it does not seem adequate to cover all the expenses since most people see holidays as a chance to splurge. It may be on a most wanted appliance, gadget or pair of shoes, or even on that long overdue vacation. Added to this is the long list of relatives and friends who deserve a special gift. It is no wonder that a personal loan is considered a savior during such time.
If you are planning to get a personal loan, you need to arm yourself with all the information that can help you find the best deal. Personal loans vary in many ways and you have to determine which of them can meet your specific needs so that you can avoid paying unnecessary interests and be able to meet your liabilities.
The Types of Personal Loans
There are two types, the secured and unsecured personal loan. A secured loan requires a collateral to be approved. This could be any of your assets, like a house or a vehicle. The asset will depend on the amount of loan you are applying for. Because of this collateral, this type of loan offers a low interest, which makes it ideal if you are borrowing a huge amount.
An unsecured loan, on the other hand, does not need a collateral to be approved. However, expect to pay a higher interest for this, as financial institutions are taking a risk in giving you this loan. This type of loan makes it ideal for small loans and for people who do not want to put any of their assets as collateral.
How Long Does it Take to Repay a Personal Loan?
Personal loans have shorter terms than mortgages. Financial companies offer a variety of terms to meet different needs. If you want to save on interest, it is best to choose the shortest term if you can afford to pay it. This may be in a few weeks or months. However, if your financial status makes it impossible to repay the debt in full fast, then you have the option to take a personal loan with up to five years term.
Does Your Credit Score Affect Your Loan Application?
This very much depends on the company where you plan to take the loan. Banks always require a good credit score and a proof of income before they can process your application. This is where they base their trust on you in terms of your capacity to pay. A bad credit score means that you have been delayed in paying your previous loans and this comes as a red flag for banks. This does not mean, however, that people with bad credit history will never enjoy taking a personal loan in the future. Other financial institutions will let you borrow the money without looking at your records, but expect a higher interest rate for this. Such is the case with payday loans or cash loans. This type of loan has a very short term and a high interest rate, which is why it should only be acquired for small amounts. People who get this type of loan can use this to build their credit score once again, which means they should pay their debts on time.
Who Offers Personal Loans?
You can get a personal loan from banks or other private lenders. Banks often offer low rates, but the application process can take some time, as they normally have to investigate your financial background. This is not a worry if you are sure that you can provide the requirements and as long as you file the loan application long before the actual time you will need it. Otherwise, you have the option to get the loan from a private lender. Cash loans can be applied online nowadays with a quick approval of just one day.
In summary, you need to weigh down various factors when you are planning to get a loan. Do not be tempted by low rates if it also requires a longer term or you will end up paying high on the interest. Remember, you are using this loan for the holidays so let yourself enjoy it and avoid making it a burden long afterwards. If your finances allow you, always go for the short-term personal loan and only borrow the amount you actually need.
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