If you want to obtain a personal loan, it is important not only to be familiar with personal lending conditions but also to explain precisely why you want to borrow that money.
If you wish to obtain credit, you must be willing to follow these steps:
- Explain why you need to borrow money. Do you need, for example, a new car or home repairs? Perhaps you need to borrow to pay medical bills. A loan can also improve your credit history if you use it to pay off existing debts.
- Explain how much money you need and what repayments terms you seek. When trying to borrow money, it is crucial that the borrower clearly understands the risks and also the conditions that accompany a specific loan.
- Prepare a detailed repayment plan. Your monthly installments cannot exceed 15% of your monthly income. You need to carefully assess how much you can afford to repay each month. Getting this part of your application right is important if you want to keep your overall costs to a minimum.
If you follow these three steps carefully, you are more likely to complete the loan approval process successfully.
Personal loans – requirements
Applicants will need to provide the lender with specific information by completing a form. Financial specialists will then determine whether the loan is suitable for you, and also whether you have the ability to pay back the money.
You will be asked to provide your social security number and details about your driving license. The lender needs to be able to confirm your identity to make sure that the application is not a scam.
What is a personal loan?
A personal loan, as opposed to a business or commercial loan, is a loan to an individual person for his or her personal use.
Personal loans are typically much smaller than mortgages. Most people use them to purchase a car, pay for a vacation, renovate their home, or finance a wedding. They are also used for funeral costs, medical bills, and other unexpected expenses.
Personal loans have a significantly shorter term than, for example, mortgages. Rather than repaying over twenty or thirty years, monthly installments span from one to five years.
There are many different types of loans out there, designed for a variety of purposes and circumstances. Understanding how they operate is crucial if you want to properly manage your debts.
Secured and unsecured loans
There are two types of personal loans:
- Secured Loans: the borrower must offer a personal possession as collateral (security). This means that if he or she defaults, i.e., fails to pay back the loan, the lender can seize the item and sell it to recover the money it lent.
- Unsecured Loans: the borrower does not need to offer a personal possession as collateral. This type of loan is only ever offered to people with a high credit score. Unsecured personal loans are rarely for very large amounts.
In some countries, such as the United States, personal loans are popular. According to CNBC, in 2018, US personal loans totaled $138 billion.
In an article, CNBC wrote:
“The unsecured personal loan market hit an all-time high last year, surging 17 percent year over year to $138 billion, according to data from TransUnion released Thursday.”
“Digital-first financial technology companies were largely responsible for that momentum.”