How to Successfully Secure a Personal Loan
Finance

How to Successfully Secure a Personal Loan

A personal loan is an unsecured loan that doesn’t require collateral or security. It can also be availed with minimum documentation. Personal loans can be used for any legitimate financial needs as per your wish and requirement. You can fund a vacation, buy personal use items, pay for your medical treatment, home renovation expenses, spend on a wedding, finance your children’s education, and more.

Personal loans are generally small loans that have higher interest rates compared to car and home loans—since they are unsecured and carry greater risks when sanctioned. Defaulting on personal loan reflects in your credit reports and it adversely affects your chances of acquiring credit cards and other loans in the future. Here are a few varieties of personal loans:

1. Small loans
Small loans are a type of personal loans that are not secured against any collateral and they are ideal to meet emergency expenses. These loans should be used sparingly for exceptional cases and should not be used to fund all kind of requirements. Some unique features of small loans are:

  • They are strictly meant for emergency and unexpected expenses.
  • They are relatively smaller and have short loan terms.
  • It should be used rarely like a lifeline.
  • The repaying period ranges from 1 to 6 months.

2. Loans from credit unions
A credit union is a financial cooperative that is managed by a group of members and it is driven by the principle to help people by providing financial services from pooled deposits at low interest rates. A credit union can be a small setup with few volunteers to large entities that includes thousands of members. It can be formed by large corporations and companies to provide financial assistance to their employees and members. An important feature of credit unions is that unlike banks—they are meant to serve a particular region or a specific industry. Another big difference from banks is that credit unions are not-for-profit co-operative setups.

3. Bank loans
A bank loan is a sum of money borrowed by an individual or an organization from a bank to fund specific purposes like purchasing a car, home, machinery, important supplies, and buying fixed assets. Bank loans can be a medium to long-term option where the bank sets a fixed repayment period with the interest calculated on the disbursed loan amount. Bank loans are mainly used for investment purposes and come with a lower interest rate. Personal loans are also a type of bank loans that are acquired specifically for personal use. Here are some tips to successfully secure a personal loan:

  • First of all, maintain a positive credit history and a high credit score.
  • Choose the right lender after doing a lot of research.
  • Read the fine print and educate yourself with a complete disclosure of the loan terms.
  • Sign up for personal loan at low interest rates.

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