Updated: Feb 11
Personal loans can be a great option for your financial needs in the right scenario. While some may think that it is expensive, there are certain situations wherein it could be your only choice left. In this article, we talk about personal loans and how to determine whether it is meant for you.
What is a Personal Loan?
Loans are often made for specific purposes and with collateral. For example, mortgages are loans made to buy homes with the purchased home as collateral, or business loans are specific loans to startup or expand a business.
However, a personal loan is a type of loan without any specific need for documentation as to what it is for. While some creditors may ask, most of the time, they only want to ensure that the borrower can pay off the loan. Most of the time, personal loans do not ask for collateral, which results in higher interest rates due to the higher risks.
There are also times wherein the personal loan is secured and may ask for collateral, which could be your bank’s ATM card, properties, and other material possessions that are equivalent in worth or more in value than the amount being borrowed.
When Should I Consider a Personal Loan?
As mentioned before, personal loans can get expensive but may be your only choice. There are different situations wherein a personal loan is your best choice. However, there are also times where it might be more ideal to apply for a different kind of loan.
For example, if you have a lower credit score or are just starting out with finances and need some funds, then an emergency personal loan would be ideal. Additionally, if you only need it for a shorter amount of time, like about 12 to 60 months, then it is more ideal to get a lump sum through a personal loan.
You may also want to consider a personal loan if the credit limit you have on your credit cards may not be enough. Lastly, if you do not have any collateral to offer, you should ideally go for a personal loan instead.
Am I Qualified for a Personal Loan?
Personal loans tend to be easier to apply to. However, they have higher interest rates. While some creditors would still run a background check on you, they do not have high standards for your credit score. Rather, they are just more concerned with the stability of your income and ability to pay.
It is also often that they do not ask for collateral, but would request references. Since it may be a high-risk lending transaction, they would ask for a list of references to check for your behavior and ability to repay.
However, there are also companies that may request collaterals. These are secured personal loans that are lower in interest rates and may offer even higher amounts for the borrower. Yet, if the borrower fails to make timely payments, the collateral may be seized.
Regardless of what kind of personal loan one would make, it is important to be able to have timely payments. This will affect one’s credit score and their future ability to be able to borrow money.
There are many times when personal loans are the best option you may have. While they may be expensive, they could still be your cheapest and the fastest way to secure some funds you would need. Make sure to consider the factors we have mentioned above when checking if you are qualified for a personal loan.
For personal loans in Athens, AL, Athens Finance is for you. We offer same-day installment loan services for your personal financing needs, with as little documentation needed. Contact us today to apply for a personal loan.