Personal Loans

Table of Contents

Personal loan

A personal loan is the short-term loans granted to individuals for personal use without presenting collateral security. Traditionally, personal loan is being obtained by the salary earners individual who are employees of government or private. It is like any other loan, which is being offered by different financial agencies. Individual could obtain the loan from banks, credit union, and authorized individual lenders. It has interest rate higher than the mortgage loan interest rate. Personal loan is designed to meet the urgent financial obligation of individual. In addition, it has a fixed interest rate and total payment must be paid within the agreed period. However, some lenders charge variable interest rate on personal loans. Since lenders do not require collateral security for this kind of loan, therefore it can be referred to as unsecured loan. Personal loan is being used for purchasing of personal items like household materials, cars, and other essential materials. It is easy and fast to obtain personal loan. It can be approved within minimum of 1 minutes and maximum of 2 weeks depending on the lenders. One can obtain a minimum loan of $300 and maximum of $50,000 as personal loan. Learn more about Quick Loans

Discover Personal loans

Discover personal loan is a loan granted to individual by the Discover, a loan provider company. The approval of Discover personal loan is easy without origination fee. The mode of payment is flexible between 36 months to 84 months. It has fixed interest rate, which do not change on monthly payment. An individual can secure up to $35,000 from Discover without any collateral.

Why Personal loans

A personal loan is an important part of financial planning of an individual in meeting his/her financial obligation. It is an alternative means of borrowing for individual and does not require collateral. It enables the individual to meet his/ her needs when it arises. It requires less documentation compare with traditional/ mortgage loans. It is easy and fast to obtain from banks, credit union, and standalone lenders. It is flexible in nature.

Why need Personal loans

Personal Loans Each individual demand for personal loan for different reasons. The reason from one individual differs from the others. However, personal loans are not cheap, but easy and fast to obtain without collaterals. People obtain personal loans to meet the immediate need such as medical expenses, educational expenses, household needs etc.  In addition, large number of people obtains such loan in form of car loans or car repairs loans while other secured the loans for home improvement. Debt consolidation is another reason people secure personal loan. By obtaining personal loan, individual will be able to restructure his/her debt and pay back some debts that are due. Learn about obtaining a payday loans

Who need Personal loans?

It is available for every individual that meet certain criteria for the application of the loan. Personal loan is needed to compliment the financial obligation of every individual. Each individual must meet eligibility test before the loan will be approved for such person. The person applies for it must be more than 18 years of age and has regular source of income greater or equal to $500 a week or $1,000 a month. People with low income can also apply for the loans.  Individual with bad credit card or having credit card or personal loan debt can also be given opportunity to apply for personal loan. Higher income earners can also find the loan helpful.  Employees in both private company and government work need personal loans.

What Types of Personal loans?

There are different numbers of personal loans that are available, which is varies from country –to- country and region- to -region.  The following types of personal loan may be found common but the list is not limited.

  • Unsecured personal loan: The common characteristic of personal loan is that it does not require of collateral before you can obtain such loan. The borrowers do not to submit collateral before getting its application for personal loan approved. Any personal loan obtain without any collateral is refer to as unsecured credit.
  • Secured personal loan: This is another type of personal loan secured on an asset especially asset that borrower used the loan to finance or another asset. The people commonly demands this type of personal loan.
  • Car loan: This kind of personal loan is used to finance the purchase of car either new or second hand cars.
  • Car repairs loans: this is personal loans granted for the repairs of the personal car of the applicant.
  • Line of credit: This type of personal loan gives the borrower to obtain loan to certain limitation. Therefore, there is limit to what an individual can obtain in form of loan at a period.
  • Debt consolidation loan: This type of loan enables the individual to manage his/her debt. By consolidating the present debt, it will enable the borrower to enjoy reduction in the interest rate.
  • Overdrafts: This is another type of personal loan that allow drawing from your bank account more than available balance to meet the financial obligation for that period. It is not secure on any asset but it meant for short- period. Overdraft as from of personal loan may not be granted more than 3 months. Visit the Cash advance page to see if it’s right for you.

How Do Personal Loans Work?

An individual that want to obtain personal loan need to sign an agreement with the lender and must accept the terms and conditions of the loan. Here is how it works:

Application and approval

The borrower need to apply to a bank, credit union, or standalone lender online, over the phone or in-branch, based on the means of application that the lender has. If the borrower passes the eligibility test, the approval period depends on the lender and the type of loan applied for. The approval period may range from 1minute to two weeks.

Loan contract

The borrower must agree to the term of contract of the loan applied for after it has been approved. The term of contract will include the mode of payment and number of payment to offset the loan.

 

Loan terms

The term signifies the number of years, weeks, or months for the repayment of the loan. There must be agreement on the loan term between the lender and the borrower.  The terms of the loan usually have impact on the annual percentage return or interest rate.

 

 Loan costs

The loan costs include the interest on the loan, establishment fee, and other fees as established by the lender. The borrower must critically examine the cost so as to determine whether it is affordable or not. The loan cost must be agreed by both parties. Loan cost includes annual interest rate, processing fees, and other hidden charges.

 

    Loan Types.

There are numbers of personal loan to be obtained. The borrower must critically examine his/her need before selecting any type of loan. In addition, the borrower needs to consider his/her source of income. Both parties must clearly understand the type of loan chooses.

How personal loans are approved

Getting approval for the personal loan depends on the lender’s policy and the means of applying for such loan. Personal loans are approved by the lenders when the borrowers fulfill the terms and conditions of the loan as provided by the lenders. Some loans may be approved within shortest period, while other may take longer period but not exceeding two weeks. The borrower needs to apply for the loan, get the better credit score, collect documentation, and determine the amount to be borrowed. The documents require include the proof of identification, proof of regular income and other necessary documents.

 

Why personal loan is bad?

Everything that has positive side may also has negative sign.  Personal loan is regarded as bad because of the following reasons:

  • Higher interest rate than secure interest rate: personal loan is regarded as bad loans because of it high interest rate when compared with interest rate on the secured loans. The high interest rate charged by the lenders makes most personal loan unaffordable for people.
  • Difficult to secure loan with poor credit score: majority of people with poor credit rating find it difficult to obtain personal loans from lenders. Credit rating is one of the factors used by the lender to determine the eligibility of the borrower before approving their application. Each lender set its own minimum credit score for the applicant. Failure to meet the minimum credit score means that the application of the applicant will not be successful.
  • Cost of loan is higher: Another factor that makes the personal loan a bad loan is the cost of the debt. Cost of the debt includes processing fee, interest rate and other hidden charges. Some lenders usually include some hidden charges in the loan cost, which makes its repayment to be difficult. Borrower should examine the terms and conditions of each personal loan carefully before applying for such loan.
  • The term of payment is short: Most of personal loans are on short -term basis. The tenure of this kind of loan is usually being between 6 months to 5 years. The short – term tenure makes it difficult to be used on a long-term project.

Despite personal loan numerous advantage, the drawback of personal loan makes some people to term it a bad loan.

What is Personal Loan Interest Rate?

Personal loan interest is the additional amount charged by the lender on the actual amount collected as loan. It is the difference between the actual total amount paid over the payment period and the amount collected as loan at issuing day. Total interest due on a particular loan is usually spread over the entire period of the loan on a monthly basis.  Interest rate, on the other hands, is the total amount of interest expressed as a percentage of actual amount obtained as loan. Generally, interest rate on any loan is usually express per annum. Personal loan interest rate varies from the lender-to-lender and country-to-country. Each lender charges Annual Percentage return (APR) which usually being advertised along the personal loan. The interest rate on any loan is being affected by the term of the loan and the competitiveness of the loan.

 

How Personal Loan Affect Credit Score.?

Personal loan like any other loan has impact on individual credit score. The borrower needs to be careful in their selection of personal loan.  Personal loan with high interest rate may create repayment problem. It is better to choose a loan with low interest rate with longer year of payment. Three factors have high impact on the credit score of the individual. The factors include maintaining a positive payment history, paying more than the minimum amount due each month, and reaching a low balance owing (below 30%) as soon as possible. Some lenders require a credit score of 640 and above.

 

How Personal Loans Affect Your Credit Score

Personal loans affect the credit score of the borrower. The amount of loan obtained and the payment history of the borrower have impact on the credit score of the borrower during the tenure of the loan. When you apply for personal loan, the lender will evaluate your credit history to determine the credit worthiness of the applicant. The factors that affect the credit score of an individual are age of credit, credit utilization ratio, and mix of credit.

·         Age of credit

The lender will evaluate the repayment history of the borrower. The longer the tenure of the personal loan the more it has influences the credit score of the borrower. If the borrower pay his/her loan at appropriate time, the credit score of the borrower will be boosted while the more the borrower default in payment, the more the credit score are affected negatively.

 

·         Credit Utilization Ratio

Credit utilization ratio is the rate at which a successful applicant use his/her debt compare with the available credit to him/her. Credit utilization ratio indicates whether borrower is using too much or less of debt compare with available credit. Where borrower is using too much debt, the credit score will be affected negatively while lower use of debt improve the credit score.

 

·         Mix of credit

The mixing different types of loans will affect the credit rating. Where an individual has different types of loan at a particular period, such number of loans will have impact on the credit score of such person. If the borrower carefully selected its loans, it may have positive impact on the credit score while unhealthy selection of loans will influence the credit score negatively.

Why Personal loans are Rejected?

Personal loan likes any other loans can be rejected beginning from the point of application to the point of approval. Application of an individual for the loan may be rejected due to different reasons by different lenders. The application may be rejected for any of the following reasons:

  • Wrong documentation by the borrower gives the lender no option than to reject the application of the applicant. Wrong information will not allow the lender to ascertain true information about the borrower. It will also affect the credit rating of the borrower.
  • Error on the credit report of the potential borrower will affect the credit rating of the borrower. Every lender will evaluate the credit report of the borrower to determine the eligibility of the borrower. Where there is an error on the credit report of the borrower, the application of such borrower will be rejected for correction and represented.
  • Failure to meet the criteria set by the lender leads to the rejection of the application of such applicant. The applicant must read the terms and conditions of the loan carefully before applying for such loan
  • Low credit score is another reason for the rejection of the personal loans application. Most of lender set out the minimum credit score to be accepted for any kind of loan. Failure of the applicant to meet the minimum required credit score will end up in rejecting his/her application.
  • The potential borrower has been declared bankrupt. Where a borrower has been declared bankrupt meaning that, such individual will not be able to pay back his/her debt. No lender will give loan to such individual during the bankruptcy period. Therefore, application of a bankrupt for will be honored.
  • The borrower has excess debt. Where borrower has excess debt than what his/her income can offset within the period, application of such person will be rejected.

Who Offer Personal loan

Financial agencies such as banks, credit union, and authorized individual lenders, provide personal loan for the populace. Online lenders such as peer -to – peer lending also contribute immensely in providing personal loan for the people. The borrower need his/her credit score and carefully select his/her lender. Bank makes loan available to their customer that has account especially salary account with them.  Credit union makes loans available for the group of people that come together to form a group for borrowing. Authorized individual lenders or standalone lenders provide loans to most of people that apply for the loans.

 

Where to Get Personal loan?

Personal loans are common and available within our vicinity. Personal loans are available in our banks, credit union, and authorized standalone lender.  Banks, credit union, and standalone lenders are available in our communities and states. Another alternative place is the online lender that can be found online by searching the web. This means that we can find personal loan lender at our fingertip.

Banks that Offer Personal loan

There are number of banks that offer personal loan in every country. Virtually all the commercial banks offer such loan though their interest rate, terms, and conditions may differ. All banks that accepted deposit from customers also give out loan in one form or the other.

How to Get Personal loan from Banks

Getting personal loan from the banks, one needs to follow the normal procedures of applying for any loans except the provision of collateral. The procedures include applying for the loan, fill necessary document, and wait for the approval from the banks. A bank customer with good historical financial record has better chance of getting loan with best rate. The credit score of the individual also helps in securing loans from the banks.

Which banks offer personal loans?

Majority of bank most especially commercial banks is offering personal loans. Some banks are specialist in giving out loans while other combine normal banking activities with the provision of loans.  Since majority of banks accept salary account from their customer, they too also need to provision for advances available for their customer at the point of need in form of loan.  Personal loans are the common loans among the banks but at different rate and conditions.

What are Personal loans from Banks?

Personal loan from banks are the loan to individual to meet their financial obligation at a point in time. Loans are the same regardless who offer it except little changes in the terms and condition of such loan. The interest rate on personal loan from ban is higher than the interest rate from the credit union but lower than that of standalone lenders.

Which Bank Personal Loan Is the Best?

Factors that determine best personal loan offer differ from state- to -state and country-to- country. The best loan from bank must have low interest rate, low or no charges, and longer repayment period. Any bank that offer a competitive rate with little or no charges and friendly terms of payment offer the best loan.

Which Personal Loan Is Best?

Personal loan that is best is the loan that has lower annual interest rate with long-term tenure and no hidden charges. Loan from lenders are differ because of different rate offered by each of them. Loan that is affordable in term of total cost of the package and easy to access will also be regarded as best. The yardsticks of determining a best loan differ from country –to- country and region-to-region. Best personal loan can be categorized in term of interest rate, in term of repayment period, in term of charges, and   in term of accessibility.

What Personal Loans Are Easy to Get Approved for?

Applicant need to follow the lay down rules and regulations of the lender to get its loan approved. Getting approval for personal loans can be done within 1 minute or up to two weeks depending on the lenders and means of application available to the borrower. Once the borrower files the application and meets all other criteria, the approval of loan will be fast tracked. Conclusively, it is easy to get loan approval from standalone loan provider than the bank while it is easier for existing bank customer to get approval easily than the new bank customer is. Generally, existing customer with all lenders get the personal loan approval easily than the new customers is. The reason is that existing customers do not need any form of documentation again.

Who is Best for Personal loans?

Personal loan is recommended as only part of debt-management strategy. It should not be seen as means of meeting all financial obligations even if it can be delayed. It is best for the person that has financial planning and discipline with good credit score. An individual that want to obtain loan must have existing means of regular income.

How Much Personal loan can I Get?

The amount to get as personal loan depends on the lender and the type of loan applied for. The credit score of the borrower and his/her week or monthly salary also play critical role in the determination of amount to be obtained. The interest rate and the repayment period are also factors to be considered before applying for a certain loan. It is better for the borrower to have carefully calculated the amount he/she can get before applying for loan in order to avoid rejection. Depending on the lender, one can get as low as $500 and as high as $50,000.

The factors to be considered by the lenders before approving any loan include the credit score of the borrower, current income of the borrower, employment history, equated monthly installment, repayment history, and other personal loan eligibility consideration.

What Personal Loans Do I Qualify for?

The choice of the loan to be applied for is the sole decision of the borrower. He/she needs to consider some factors to determine the type of loan that such person qualifies for. The factors to be considered include the source of income, credit score, interest rate, other charges, and repayment period. The processing charges and total amount to be repaid at the end of the loan tenure also determine the type of loan to be applied for.

Lender is the one that will finally determine whether a potential borrower qualify for the loan or not. Lender uses different criteria to determine the eligibility of a borrower depend on the type of loan applied for. The criteria used by the lenders include the credit score of the borrower, current income of the borrower, employment history, equated monthly installment, repayment history, and other personal loan eligibility consideration.

What is Personal Loan Insurance?

Personal loan insurance is an insurance policy that is meant to cover the personal loan repayment during the period of occurrence of unforeseen circumstances such accident, loss of job, death, illness, sudden disability etc. It can also be referred to as loan protection insurance, Credit Insurance, Payment Protection Insurance (PPI), and Loan Shield Insurance.  With this policy, borrower will not stop repayment during period of accidents, illness, and other uncontrollable disaster. Personal loan insurance also cover person that is made redundant or declare bankrupt if he/she is self-employed. If borrower dies or diagnoses of a terminal disease or becomes disable because of the accident, the insurance company will offset his/her debt. This insurance policy helps in reducing the rate of default because of natural disaster. Personal loan insurance is available to all borrowers especially borrower with huge debt.

Personal loan from Other Countries other than the USA

    Which personal loan is best in Malaysia?

There are numbers of lenders in Malaysia that offer better packages for the personal loan. The interest rate in Malaysia ranged from 4.49% to 13.75%. The top best personal loan provided in Malaysia include Bank Rakyat, CIMB Personal loan, RHB Personal loan, Bank Islam Personal loan, Maybank Personal loan, BSN Personal loan, and Ambank personal loan.

MBSB Personal Financing Mumtaz

MBSB Personal Financing Mumtaz provides personal loan to government employees and government linked company employees. The minimum interest rate per annum is 3.4% while the maximum is 3.8% depending on the type of loan. This is sharia compliant loan, which follows the principle of Tawarruq concept in Islam. MBSB Personal Financing Mumtaz provides loan up to RM250,000 with relatively low interest rate without any collateral. To be eligible for this loan, the borrower must have three years working record with an employer. It is compulsory for every successful applicant to take mandatory Takaful insurance package. The repayment of the loan is immediate deduction from the monthly salary of the successful applicant.

Bank Rakyat Personal Financing

Bank Rakyat Personal Financing is a personal loan provider targeting the civil servant in the country. It charges interest rate of 3.2% per annum with no collateral and the Takaful insurance package that comes with it is not mandatory. Individual that does not take Takaful insurance policy will pay interest rate of 4.06% per annum for any loan of three years while it is 4.51% per annum for loan of ten years and above tenure. The loan repayment is direct transfer from the monthly salary of the successful applicant. Other benefit of Bank Rakyat personal financing loan include free Premium Bank Rakyat Banking Membership and cash pay back of RM0.50 on all MEPS and Tabung Haji transactions at Automated Teller Machines.

Maybank Personal loan

Maybank Personal loan is a loan that is available for both government and private employees. It is the one of the easiest and fastest personal loan for individuals either government employees or private employees in Malaysia. It has a competitive rate, which is fixed depending on the loan tenure. The minimum interest rate per annum is 6.5%.

The personal care insurance protection is not mandatory for the loan but it is advisable to take such insurance protection.

   What are personal loan rates in Canada?

The interest rate on personal loan in Canada range from 5.6% to 26.9%.  Banks and other lenders are now providing a promising online loan that has been anticipated for long by the Canadian. In Canada, you can get as low as $300 as personal loan. The best personal loan in Canada include Borrowell personal loan, Affirm Financial personal loan, CIBC Personal loan, CIBC Personal Car Loan, CitiFinancial.

CitiFinancial.

CitiFinancial is one the leader in the world of financial services delivery. CitiFinancial provides a minimum loan of $500 while the maximum is $25,000. The annual percentage return on the loan at CitiFinancial range between 19.99% to 36.99% depending on the tenure of the loan and the credit score history of the applicant. CitiFinancial does not have any hidden charges.

Borrowell personal loan

Borrowell personal loan is one of the cheapest loans in Canada with annual percentage return range from 5.6% to 25% depending on the tenure of the loan. To apply for Borrowell personal loan, there is no minimum income but the loan range from $1,000 to $35,000 with minimum tenure of three and maximum of five years. The potential customer must pass eligibility test through the credit score. Each applicant must have at least 660 as credit score before such person’s application can be approved.

 

Affirm Financial

Affirm financial personal loan also offer one of the cheapest loan in Canada. Affirm Financial provides loan as low as $300 but maximum amount is $10,000 with repayment period of between six months and five years. The annual percentage return on the loan stood between 29.9% and 39.9% depending on tenure of the loan.  There is no minimum credit score for the applicant.

Which personal loan is best in Singapore?

The interest rate in Singapore is as low as 4.5% for three years’ repayment period of a personal loan. The loan in Singapore is up to four times the monthly salary for the citizens while the foreigner living in the Singapore can get two times the monthly salary. The best personal loans in Singapore are HSBC personal loan, Citibank Ready credit personal loan and POSB personal loan. Other top personal loan lender in Singapore include standard Chartered Cashone personal loan, ANZ MoneyLine Term Loan, UOB Personal loan, and OCBC Extra Cash Loan

HSBC Personal loan

HSBC Personal loan provides the cheapest loan in the whole of Singapore among the lenders. HSBC Personal loan is the fastest loan without much documentation. It charges the minimum of 4.5% for three-year tenure. The repayment of the loan can also be spread over seven years. Singaporeans will be eligible for personal loan with a minimum annual salary of S$30,000 with maximum loan of four times the monthly salary while foreigners will need a minimum salary of S$40,000 but will only get two times the monthly salary as maximum personal loan. Any citizen of Singapore with an annual salary of S$120,000 and above is entitled to eight times monthly salary as the maximum loan. The maximum loan for Singaporeans is S$200,000 while foreigner is S$100,000.

Citibank Ready Credit

Citibank ready credit personal loan is the second lowest interest rate provider in the Singapore. Citibank ready credit provides annual interest rate of 4.55% with effective rate of 8.5% per annum for a minimum loan of S$1,000 for three years tenure for new borrower. For existing customer, the Citibank ready credit charges 7.39% for three years tenure loan.

Singaporeans must have a minimum annual salary of S$30,000 before eligible for such loan while foreigner must have minimum annual salary of S$42,000. Citibank has hidden charges on the granted to their customer.

POSB Personal loan

POSB Personal loan is the third cheapest loan in term of interest rate in Singapore. POSB provides a promotional annual fixed interest rate of 5.88% for loan which more than S$3,000 and with tenure of  between three and five years. POSB loan is subjected to 2% processing fee for loan of between three to five years. Like HSBC and Citibank Ready credit, to be eligible for POSB personal loan Singaporeans must have minimum annual salary of S$30,000. The maximum personal loan to be granted will be four times the monthly of the borrower while the loan will increase to ten times the monthly salary if the annual salary of the borrower increases to S$120,000 or above.

What is personal loan in India

Personal loan is an unsecured loan given by Banks and NBFC (Non-banking Financial Institutions) to their respective applicant in India. In India, personal loans can be obtained between the ranges of 50000 to 5000000 rupees. It is available for both workers that earn monthly salary and Self-employed customers. It is not generally available for students or retired people. In India, the interest rate per annum on personal loans ranges from 11.9% to 32% depending on the lender, type of loan, and tenure of the loan. The basic requirement for the loan application is adequate salary and better credit history or credit score. Other factors include years of employment, type of company the borrower worked for, place of residence of the borrower, and prevailing market interest rate.  All of these factors will be used in determining the amount of loan to be granted. The minimum age of borrower must be 21 years with at least one year of working experience. There is special loan for the women living in rural area to cater for their needs. The best personal loan in India include IndusInd Bank Personal loan, Fullerton, India Bank Personal loan, Standard Chartered Bank Personal loan, Bajaj Finserv Personal loan, Axis Bank Personal loan, Kotak Personal loan, State Bank of India (SBI) Personal loan, HDFC Bank Personal loan, and ICICI Bank Personal loan.

 

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