Personal loans are very convenient and available to almost everyone nowadays. But before you sign that loan agreement you have to ask yourself first whether you really need it. Sometimes people tend to run to the bank at the first sign of emergency without thinking the situation over first. If something unexpected happens such as a death in the family, many people go for a personal loan in order to cover the funeral expenses. This happens a lot when people don’t have funeral policies in place. However, first think before you do something like that. People could club together and perhaps come up with enough money for the funeral. You really should try a different solution to a financial problem before applying for a personal loan.
If you don’t have enough spare cash at the end of each month, it is also very tempting to apply for a personal loan. But if you think logically about it, this would make your situation worse. If you don’t have spare cash now, you are also not going to have it when you are paying back your loan instalment each month. Loans take long to finish paying and in that time that you have spent paying off the loan, you could have been saving that money for something else.
Many people decide to take a personal loan because they want to study and they want to pay everything upfront. In many cases it would be better to pay monthly for your studies as you would probably end up paying more on your monthly loan instalment than you would for you studies. Sometimes the only good reason to take out a personal loan is to buy a car. This actually works out cheaper than vehicle finance and you can finish paying the loan over a lesser amount of months. Usually the interest rate is also a lot lower. Before you decide to apply for a loan, take everything into consideration and also first try to come up with an alternative plan. Only use a personal loan as a last resort.
How Personal Loans Work
Everyone needs a little bit of help now and again and finances are no exception. Personal loans aim to help the individual to finance a new business venture, buy furniture or consolidate debt. Personal loans are often tailor-made to the individual and can therefore be helpful and not burdensome. Banks and credit institutions offer personal loans; and there are many options out there so understand how they work before you sign the paperwork.
Personal loans are unsecured loans. This means that you do not have to sign over any of your assets such as property or vehicles in order to get the loan. These loans can have either fixed or variable interest rates. A fixed interest rate will be signed on the agreement and will not change. If you choose a personal loan with fixed interest rates that do not fluctuate like credit card interest rates that are variable, this will make your personal loan a more affordable option. A variable interest will change with market values. The repayments are due over a fixed term and for a fixed amount. Personal loans are risk based, which means that the individuals credit history will determine the interest rates that will apply to them. If you have a very poor credit history, your rates will be exponentially larger that an individual with fairly small debt.
If you pay off your personal loan early you may be charged a fee but be sure to determine this before you sign the contract. Monthly payments on a personal loan are determined by the full amount of your debt, the agreed term of repayment debt, other banks fees and the interest rate. Your monthly repayment will be large enough to cover all these costs and pay off the full balance of your monthly loan by the end of the loan term. The nice thing is that most credit institutions will allow the individual applying for the personal loan to determine how often they want to pay their installments. This means that it can even be weekly if you feel this will help you settle the debt. Personal loans work in their particular way so that they work for you.
How to get a personal loan
If you should suddenly find yourself in a bad financial spot you may need to get a personal loan in order to pay your bills and make ends meet for the month. A personal loan is a short to medium term solution for unforeseen as well as planned financial occurrences. Most large banks offer personal loans and depending on your credit profile, employer and the amount that you require a personal loan could be paid out within a few hours.
There are two main types of personal loans a fixed term personal loan and a revolving term personal loan. A fixed term personal loan is granted over a predetermined period for a specified amount of money, a revolving term personal loan is a loan that you can very easily extend, once you have repaid a percentage of the loan you can relend that amount as well as increase the repayment term. While most people choose a fixed term loan due to the fixed monthly repayment schedule and easy application process involved the revolving term personal loan would be a much better choice as it enables you to gain access to additional funds quickly and easily.
A factor to keep in mind when considering personal loan options is the initiation fees charged by the banks. The national credit act has made provision for initiation fees to be added onto a loan and most credit providers charge the maximum fees allowed. If you are lending a small amount of money it would be recommended that you compare all your personal loan options before deciding and to keep the initiation fees in mind as well.
In today’s modern world it is also possible to apply online for a personal loan, most major banks have an advanced website, and you will also find several private lenders offering personal loans online. If you decide to take a personal loan from a private lender be sure to do your homework and make sure that the lender is registered with the necessary authorities and that you are not falling victim to a scam or being forced to pay exuberant interest rates and fees.
How is a long-term personal loan used?
Long-term personal loans allow you to borrow money from a bank with a long repayment period. These personal loans are most commonly used when you don’t have enough money to pay for large, unexpected expenses like medical bills or car repairs. The interest rate will vary depending on the loan amount, term, and borrower’s credit history, but it can be lower than a short-term loan.
Get a personal loan for a long time
Many lenders offer long-term personal loans. When you apply, the NCA will check your credit to ensure you can afford your monthly payments.
A legal long-term personal loan requires
The creditor will ask for your most recent payslip, proof of address, ID, and three months’ bank statements. It all depends on how much you borrowed, how much you can afford to pay back each month and any other terms set forth by the financial institution.