The personal lending process usually involves obtaining small loans that are used to pay off current and unforeseen expenses. High speed of application, availability and versatility makes this form of financing extremely popular among borrowers. To get matched with the right lender, you can use our referral service.
What is a personal loan?
Personal loans are popular forms of financing that allow borrowers to borrow money for almost any purpose. Such loans can be repaid over a long period of time. Most personal loans are unsecured, which means customers do not need to provide collateral, unlike secured mortgages or car loan agreements.
Benefits of personal lending:
- The size and volume of the loan is adapted to meet the needs and financial goals of the borrower;
- The duration of the loan agreement can reach several years;
- Funds can be used for whatever purpose;
- Often, you do not need to provide collateral.
Not all such forms of financing have the same eligibility criteria. In some cases, lenders issue a loan even if the borrower has bad credit. In other cases, the client will have to provide collateral or involve a guarantor.
When starting the lending process, the borrower is strongly advised to read the loan agreement carefully.
Purpose of personal lending
Personal loans can be used to purchase goods and pay for services. The use of such loans depends on the financial needs of the consumer. For example, a personal loan may help cover the huge costs associated with home renovations, purchasing products or paying for medical services. If the borrower has no savings, a personal loan will provide an opportunity to get the required amount and then pay off the debt over time.
The main goals of personal lending:
- Buying cars without participating in the car loan procedure;
- Additional financing for the purchase of real estate without using a mortgage agreement;
- Maintenance of vehicles;
- Overhaul of real estate;
- Payment for medical services;
- Tuition fees;
- Purchase of household and computer equipment bypassing a credit deal with a store;
- Purchase of exclusive products that are not sold through conventional consumer lending.
The essence of the considered form of borrowing is to receive a sum of money that can be spent on the purchase of specific goods and services. Personal loans are usually adapted to financial needs, allowing the borrower to have enough free time to pay off the debt. These loans have to be repaid in the form of mandatory monthly payments, therefore the loan repayment schedule must be calculated in such a way as to maintain the borrower’s level of solvency in good condition.
It is recommended to apply for a loan via our online referral service. We will select the most suitable lender for your needs. Personal lending is an extremely profitable solution from an economic point of view.
Ideal borrower traits:
- Be a US citizen or legal resident;
- Be at least 18 years old;
- Have a steady income;
- Have a bank account in your name;
- Have a good credit history and a high credit score;
- No related debt obligations other than credit cards.
The amount of the monthly payment may vary, taking into account the parameters of the client’s income. You should discuss a schedule of regular payments with your loan manager. An experienced specialist will draw up an impeccable debt repayment plan that will reduce the payment burden on the client.
How to get a personal loan
Personal loans are easy to access.
Stages of long-term consumer lending include:
- Fill out a short application form on our website;
- Get matched with the right lender;
- Wait for the lender’s decision;
- If approved, review the loan offer and e-sign the agreement;
- Get the money.
In the process of applying, it is strongly recommended to make sure there are no hidden fees.
Common types of personal loans
Need a loan? A potential borrower can choose a suitable consumer borrowing scheme from several types of personal loans. To find the best loan for specific needs, it is enough to carefully read the terms and recommendations for concluding a deal. Individual needs and specific circumstances can influence the choice of a personal loan.
The credit line allows you to use borrowed funds as needed. The borrower pays interest only on the amount he uses. You can apply for a secured and unsecured credit line option. A distinctive feature of this form of financing is a floating interest rate. A personal line of credit is a good choice to pay for recurring expenses such as the cost of regular medical procedures or training costs.
A credit card is one of the most popular payment instruments. It is a universal loan product. Cards are classified as non-targeted lending options. They can be used to fund minor medical expenses, purchase goods, pay for entertainment and order a variety of services.
Features of credit cards:
- Renewable nature of payments;
- Activation at the request of the borrower;
- Availability of a grace period;
- Possibility of receiving discounts when paying for goods and services by card;
- The amount of payments is determined by the credit card balance;
- Possibility to increase the credit limit over time;
- The interest rate agreed upon in the contract can be fixed or floating;
- Commission is charged for transactions related to currency exchange, withdrawal and transfer of funds.
In addition to using a credit card to pay for pre-selected goods and services, the borrower can obtain other types of personal loans. Interest on the card is not charged until the borrower withdraws the money. Lenders set fairly high interest rates and require payment of a service fee, so a credit card is far from the most profitable way to borrow money.
Lenders can offer short-term deals secured by collateral. We are talking about pawnshop loans. Financial institutions accept vehicles, household appliances, jewelry and other expensive types of property as collateral. The secured and short-term nature of the transaction allows you to reduce lending costs, but the borrower risks losing property in case of violation of the previously agreed terms of the contract.
Short-term payday loans
Payday loans are small-dollar loans provided for a short term. Microfinance institutions severely limit the loan amount up to $1,000 and raise interest rates and fees to compensate for potential losses. Unsecured short-term payday loans are also called cash advance loans.
Features of quick payday loans:
- It is not required to provide a lot of documents confirming your solvency;
- The entire process is purely online;
- You can receive money within half an hour;
- Such loans can be used to improve your credit history;
- Payday lenders do not impose unduly strict requirements on borrowers;
- Regular customers can get access to more favorable terms of cooperation.
Online payday loans are suitable exclusively for repayment of unforeseen costs, as they are characterized by the highest processing speed and relaxed borrower requirements. You can get a fast loan via the Internet without visiting the office of the lender.
How to repay a personal loan
If you have a long-term loan, you will have to make monthly payments. Whether the client takes two years or a decade, the borrowed funds must be repaid. If the transfer to pay off debt is made using a bank account, you can set up automated transactions.
To repay a loan, you can use:
- cash desk, ATM or terminal;
- electronic payment system;
- transfer from a card through a self-service terminal or Internet banking.
Additionally, you should inquire about the terms of loan repayment. The lender cannot prohibit the client from repaying the debt early. Such an opportunity is spelled out in the legislation, but the borrower is obliged to notify the lender about early loan repayment before the due date. Usually, early repayment saves money, but some financial institutions impose a penalty for ignoring a previously developed payment schedule.
Do not forget that the financial institution undertakes to transfer information about the cash flow on the current account to agencies involved in the collection of credit reports. If clients make timely payments in good faith and keep their credit score in good shape, a long-term transaction will help improve credit history.