The good thing about people is that they always find a way to make life easy, which is exactly why the banking system exists. With banks, people can get loans and finance their various development projects even when they don’t have all the cash needed. For example, if you’re building or buying a home and you don’t have enough money to cover the expenses, you can get a loan or mortgage to finance your plan.
To make the money-lending system even better, personal loans were introduced. Now, personal loans have, since their inception, become a popular option for many people. You want to know what a “personal loan” really means and how taking one can help you tackle your day-to-day challenges.
What Is A Personal Loan?
A personal loan is a loan taken in a simple process as opposed to the average loans that involve a more comprehensive application and approval process. A personal loan may be secured or unsecured. In fact, it’s fairly easy to get an unsecured personal loan if you’re employed and have a pay slip. With this type of loan, you pay fixed monthly installments over a given period of time.
In most cases, the interest rate is also fixed. In essence, a personal loan is much like other loans, only that it’s processing and the dispensation is expedited and the terms are flexible. This is the kind of loan that can really come in handy for most people.
How Can A Personal Loan Help You In Your Daily Life?
At this point, you’ve questions:
How important are personal loans to people on a day-to-day basis? What advantage do you get when you opt to take a personal loan instead of the common type of loan? Are banks the only places you can get a personal loan?
- 1. You can use a personal loan to consolidate your debts
Take an instance where you have a few debts to cover and they’re really draining you – having to deal with each separately. The debts may be student loans, utility charges, and other such costs. In that case, you can take a personal loan and use it to off-set all other debts. This is called debt consolidation where one debt replaces the various others. From there, you only have one debt to worry about. This is also more effective and more manageable as you no longer have to pay the interest rates on many debts.
- 2. You can take an unsecured personal loan
There are so many people out there who really need some extra financial support but can’t afford the usual bank loans. These bank loans require you to submit specific documents of ownership of some property. When you take a loan, these documents are placed under the custody of the bank’s management as collateral for the loan extended – the logic being that the collateral will be liquidated to cover the loan in the event that you fail to clear the debt.
However, with a personal loan, you don’t need any collateral. In fact, all you need is a functional credit card to have the money transferred to your account. This type of loan proves greatly benefiting especially when you’re looking to launch a startup business but you don’t have enough capital.
- 3. You deal with less paperwork and bureaucracy
Say you have a pretty much-pressing cash flow problem and you need an immediate fix. In that case, forget the other loan applications that put you through a ton of documents to sign and a barrage of questions to answer. While some guaranteed loan approval applications may take days and even weeks to be reviewed, an application for a personal loan could take just a few hours to a few days to go through and complete the review process. What you don’t want is a long process of getting a loan, and that’s why a personal loan is the best option in such a scenario.
That’s how a simple personal loan can turn a dull situation into a celebration. This makes personal loans more attractive than other bank loans.
- 4. A personal loan can be used flexibly
In most of the times, you’re taking a normal loan from a bank; you’ll need to provide a clear statement indicating how you’re going to use the money. More often than not, the bank will insist that you shouldn’t divert the money to any other uses except as stipulated in the agreement or application. That’s another issue that further endorses the concept of personal loans to people.
You see, a personal loan can be used in just about anyway. You don’t have to stick to whatever reason you provided in requesting the loan. For example, you can take a personal loan to cover a car purchase, but then change your mind and buy a house or pay your kids’ school fees instead. You can also acquire such a loan to cover school fees, hospital bills, or any other emergency. This flexibility is almost a life-saver!
- You can get a personal loan from various sources
You see, most people looking for the usual long-process type of loans will usually deal with banks. But you don’t have to jump on that bandwagon when you’re looking for a personal loan with flexible terms. Besides banks, you can get a loan from credit unions or peer-to-peer lending sites.
In fact, snubbing banks for other lending options give you a great chance to ink the best deal. Credit unions, peer-to-peer lending sites and such other options offer their loans at competitive interest rates that beat the banks. You really don’t want to take an option that costs you more in interest, do you?
Looking at and thinking about the current economic trends as well as the banking system, it’s easy to realize that personal loans actually “have a future” in the financial circle. In fact, with the current lending trend in continuity, the number of people opting for personal loans over others is only set to spike.