Money When You Need It
When you need money, there are several ways you can probably get some
. Personal loans exist all over the place and they can be very different depending on the type of loan you choose. Here we will discuss the different types of loans available so you can decide what the best option for you is. Some people do not even have the means to pick and choose what type of loan they want because of their credit history. But there are loan options even for them.
Qualifying for a low-interest personal loan can be quite difficult. Also known as signature loans, they are granted without the lender having benefit of any collateral. Because of this, the lenders' guidelines for making such loans are much more stringent.
Unlike a home or car loan, there is no security that the lender can seize should the borrower default. Therefore, the lender's only legal alternative would be to file a lawsuit. While it's possible that the lender could be awarded some element of personal property or a wage garnishment from the borrower, this is rarely the case. In areas that allow wage garnishment, it is usually reserved for child support payments.
Because of this limited recourse, lenders strictly require that borrowers have good credit, a good income, and financial stability before granting this type of loan. Those with excellent credit and a strong repayment history can obtain low-interest, no-fee personal loans.
Each lending institution sets its own underwriting guidelines for making personal loans. If a business relationship already exists between the lender and a prospective borrower, that institution may be a bit more lenient with regard to their qualification criteria.
This relationship could be in the form of a checking or savings account, a Certificate of Deposit, a mortgage loan, or business banking accounts. Of course, they're under no obligation to bend their guidelines for existing customers.
Generally, the qualities that they're most adamant about seeing in a prospective borrower are an excellent credit rating, job longevity, a low debt-to-income ratio, and solid financial assets. They also are very likely to want to know what the borrowed money will be used for.
Many banks and credit unions limit the size of the personal loans that they make, perhaps as low as $2,500 to $5,000. Some may loan more, but it must be remembered that all of these loans are very tough to get.
Some institutions refuse to make unsecured personal loans of any size. The ones that do grant them require the borrower, as previously stated, to have a very solid financial position. If a borrower has less-than-perfect credit, the chances of obtaining a low-interest personal loan can be somewhat low.
Are there alternatives for people with average- to below-average credit? Yes, there are. Finance companies have been around for years. They specialize in financing smaller purchases, no more than a few thousand dollars, for example.
They also make personal loans, but of course, they are not generally low-interest. The price of these loans can range from five- to ten percent above market interest rates, and can generally be amortized over a one- to two year period. As is always the case, comparing several lenders is the wisest avenue to finding the program that best fits your needs.
Another option exists in the use of cash advance loans. Also called fast cash, or payday loans, they require no credit check so the borrower's credit history is not an issue. These loans are designed to be high-risk, high-interest, short-term loans that solve immediate cash-flow problems.
They are not meant as solutions for long-term monetary concerns. It must be noted, however, that some lenders are more flexible than others, and willing to work with borrowers of all credit ratings. Some even grant personal loans up to $15,000 or more. Of course, the criteria varies greatly among such lenders, and also among loan programs of the same lender.
Again, thorough shopping is your best friend. Unsecured personal loans are obtainable for virtually any situation. Although the low-interest loans are very difficult to come by, other alternatives do exist for less financially strong borrowers. Compare the programs; become aware of what's available to you. With the proper knowledge, you'll be able to find the package that's right for you.
by: Jack Landry
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