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Classifications and the Procedure of Personal Loans

classifications-and-the-procedure-of-personal-loans

There are many people who find it so hard to sleep at night because of the prices of basic necessities in the market, the tuition fee hike and the mounting bills. In order for some people to cope-up with problems like these, they are applying for personal loans. These are loans taken to assist or to simplify someone’s financial lifestyle. A personal loan can also serve as luxury or a necessity. For instance, a personal loan can be used to pay for certain necessities like overdue rent, household bills, children’s education and can also be used for luxuries like the much awaited card, dream house or even a very luxurious vacation. Personal loan can help people to fund unexpected circumstances.


Personal loans have 2 kinds namely the secured personal loans and the unsecured personal loans.


Secured Personal Loans:


1.It requires collateral in exchange for the loan money. Automobile or home can be used as collateral.


2.With a good credit account the interest rate might be lower while bad credit can be the other way around.


3.The collateral lowers the lenders interest rate and this loan has a flexible term for repayment.


4.The repayment period can last from 5 years up to 25 years.


However, failure to repay the lender can lead for the formal confiscation of the collateral given by the borrower. There are many borrowers that cannot offer collateral other than their homes and putting that particular asset at risk is not a safe thing to do.


Unsecured Personal Loans


1.This type of loan mainly focuses on the financial capacity and character of the borrower.


2.This loan is also very hard to obtain since no collateral asked. This loan is ideal for non homeowners and tenants because they have no asset to preset as collateral.


3.The interest rate for this kind of personal loan is very high because the lender has no security that the borrower will repay them the amount they borrowed.


4.Lenders limit the amount for unsecured personal loans but the interest is ranging from 7 to 30 percent.


5.The repayment period begins from six months up to 10 years. The term for unsecured personal loan is shorter than the secured personal loans.


6.Unsecured personal loans are being approved only through the borrower’s repayment capacity and character but having a bad credit history can trigger lenders not to approve the personal loan application.


Procedure for Personal Loans to Be Approved:


1.The borrower must choose the loan that they think they have the capacity to repay the lender.


2.It is better to seek help from a financial expert.


3.The borrower must submit a loan application form. It is better if it is clear, short and has explicit information for easy approval.


4.The borrower must submit documents such as income statement, credit statement etc.


5.The assets are being verified via 2 months statements.


6.The lender will depend the approval of the loan through the terms selected, the credit history, amount etc. then if approved the process may occur in 24 up to 48 hours.


Today, there are many people who apply for personal loans because of the help that it gives them in times when they really need funds for certain things. That is why many lenders are now emerging in the loan market offering different kinds of personal loans.

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