A personal loan from a lending institution typically consists of two forms; a secured and unsecured personal loan. A secured personal loan generally requires collateral from the borrower and allows lower fees and more favorable interest rates. While an unsecured loan is granted without collateral and will come with a higher interest rate than a secured loan.
People seek personal loans for various reasons and often can use them to pay down debt or consolidate high interest rate credit cards, cover unexpected expenses, home repairs, taxes, medical bills, funeral costs, and the list goes on..
For many people today, an unsecured personal loan may seem like a better option since you do not have to provide any collateral to obtain the loan. Depending on the amount of funds you are looking to finance, and your repayment strategy, these personal loans can be beneficial to those who qualify. Since no collateral is required, the terms of financing, amount eligible to borrow, and interest rate may vary depending on the borrower’s credit rating.
Those with a high credit rating are looked at as much less of a risk in the bank’s eyes then those with a poor credit rating, and therefore will come with a more favorable interest rate. The interest rate a lender may offer will be based off certain characteristics of the borrower’s application including, but not necessarily limited to, the amount requested, previous credit history, borrower’s geographic location, and whether or not the borrower is pursuing a secured or unsecured personal loan.
Length of loan term: An unsecured personal loan generally will range from one to four years, while a secured loan may be financed in up to ten years, depending on the state and type of collateral the applicant provides.
Income requirements for personal loan: Depending on the loan product and whether or not it is a secured or unsecured loan, the minimum income requirements generally range from $10,000 to $36,000.
Amount available for personal loans: For an unsecured loan the maximum amount one can borrow ranges from $3,000 – $100,000, while a secured loan may offer up to $250,000 for eligible borrowers with high cost collateral.
Personal loans and pre-payment penalties: No, there is no pre-payment penalty if the loan is paid off early and you are only required to pay interest for the time you had the loan.
Obtain a loan with no credit history: You will be required to have a co-borrower who can qualify for the amount you are looking to borrow, and if that is not an option, you can try applying for a secured personal loan using collateral to show are eligible for financing.
You always want to make sure you do extensive shopping around because some may not qualify for a loan from your regular bank. That is why it is best to shop around because there are many lenders out there who do offer this type of financing, and some may offer more favorable terms than others.