If you’re on the lookout for convenient personal loans, the odds are you have a lot of questions regarding this popular form of financing. And this utterly makes sense. You wouldn’t consider getting a car that you know nothing about, right? Before signing the official documentation, you should know what to expect. To that end, this article aims at addressing some of the most frequently asked questions on the topic.
How Do Personal Loans Work?
Obviously, you ought to understand how this form of financing works. To some extent, a personal loan is similar to an installment loan. That is to say, you borrow a given amount of money, and you repay it in the form of installments, over a fixed timeframe. The duration of personal loans ranges from 12 to 84 months, in general. But there might be some exceptions. After having repaid the sum of money you borrowed, the account is closed.
Are There More Types of Personal Loans?
Yes, personal loans can be separated into two key categories: secured and unsecured personal loans. As the name entails, secure personal loans are backed up by collateral. The collateral will be seized by the lender granted you don’t make the repayments within the agreed timeframe. On the other hand, unsecured personal loans don’t include collateral; therefore, your eligibility will be mostly decided by your financial history and credit rating.
Where Can I Get A Personal Loan?
It depends; you can get this form of financing from traditional banks. Nevertheless, this isn’t your only option, as the lending marketplace has been greatly diversified over the last couple of years. Therefore, now, you can also choose from online lenders (paydayclick.com, paydayme.com), consumer finance companies, credit unions, peer-to-peer lenders, and so on and so forth.
Pro Tip: As numerous online lenders have emerged in the last couple of years, you should check their reliability before filing an application.
How Does A Personal Loan Impact My Credit Score?
Evidently, each loan you apply for will imminently influence your credit score. More specifically, when you file your application, the lender will immediately pull your credit, as this is part of the application process. Also referred to as a hard inquiry, it will lower your credit score by a couple of points. Typically, hard inquiries remain on your credit score for approximately two years.
Will I Need a Co-Signer?
This is, of course, an important consideration: do you need to apply for the loan with a co-signer or not? Essentially, a co-signer is the person that applies with you for the loan, agreeing to take responsibility for the repayments, in the case in which you are unable to make the repayments in time. However, this will depend on the lender you pick. Make sure you address this question beforehand.
If you’re interested in getting a personal loan, start with doing some research on the conditions you are expected to meet. Only afterward should you proceed with following the necessary steps for the application process.