When it comes to borrowing money there are personal loans available to meet every need in the US. Financial institutions offer loans for the short term or the long term, with a variety of interest rates applied. There are loans which require you to satisfy stringent conditions, and others where nothing is needed beyond proof of a pay check. Lenders can be reputable, dodgy or nothing but loan sharks, so it pays to know which kind of personal loan meets your needs, and if you are likely to be granted one.
People can take loans for a variety of reasons: there are student loans; auto loans; home loans; debt consolidation loans; loans for spending as you wish to finance holidays or big ticket purchases; immediate emergency loans. All of them have one thing in common: you pay for the pleasure of using them.
Loans can be divided into two main categories: secured or unsecured. Secured loans can be bank loans, mortgage loans or even loans obtained from the pawn shop. Each requires you to put collateral down which you stand to lose if you fail to repay.
Typically secured loans are the cheapest form of lending as you have provided an asset which can be redeemed by the lender if you default. However they have the drawback of possible loss of your asset. Mortgage loans are usually secured against the property you purchase but unlike other loans you generally need to pay a deposit to the lender in order to obtain the loan.
When a secured loan is provided by a major financial institution they are subject to credit checks. If you are approved the interest rates are likely to be preferential if you have good credit reports. However the pawn shop will not worry about your credit rating and will simply lend against the security of the asset you provide.
Unsecured loans are the most common type of loan in the US. Anyone can apply for unsecured bank loans but not all are approved. Many personal unsecured loans also require a co-signer who is a person with a proven credit record of good standing, if the borrower has no or poor credit themselves. Typically private student loans are granted to those without credit history only if they can produce a co-signer ready to take on the risk of the loan, and prepared to assume the debt if the primary borrower defaults.
Unsecured bank loans require a person to have good credit, and may involve a ream of paperwork which can take weeks to process in some instances. Many are now turning to the ease and speed of payday loans instead, as personal loans from banks become harder to obtain.
Pay day loans don’t take your credit score into consideration and are often advertised as bad credit loans. They are meant to be short term loans for financial emergencies but many use them irresponsibly and run up huge debts by taking out a second pay day loan to pay off the first one.
Whichever type of personal loan you opt for make sure that the lender is certified and that the loan is regulated. Make yourself aware of the terms and conditions which are clearly laid out awaiting your signature, and acquaint yourself with all possible penalties or charges which can be applied.