Personal Loans

The Good, the Bad and the Ugly of Personal Loans

What are Personal Loans?

Conducted mainly by banks and corporations, Personal Loans serve the purpose of attaining to personal means, may it be improving a home, buying a car, starting a small business, or even a family vacation. Banks, such as Wells-Fargo and Bank of America, usually play the role of lenders. Large corporations looking to benefit by charging interest play the game, too. When a person applies for a personal loan, most of the time they don’t need to provide a reason as to why they need the money. However, most lenders are willing to loan money only to those with good credit. People with bad credit are still able to get a Personal Loan, but they’ll have to put more effort into finding a lender that is willing to take no notice of their poor credit history.

Secured & Unsecured Personal Loans

There are two different kinds of Personal Loans: Secured and Unsecured. Unsecured Personal Loans are usually for those with excellent credit, so not a lot of paperwork is required in order to put the loan into effect. The pros of Unsecured Loans include almost no paperwork, faster processing, and the chance of the applicant’s credit becoming even better considering he reimburses the money in a timely manner. On the other hand, lenders charge higher interest for Unsecured Loans, as it is risky for them to give away money so easily. Also, there is the possibility of the applicant not paying the money back, leaving the lender not having much to do to take action.

Secured Loans are much more through, with applicants filling out paperwork and mapping out their credit history. Secured Loans increase chances of creating mutual trust between the lender and the applicant. Also, lenders usually charge low interest and extend the monthly repayment plan whenever needed. The fact that the paperwork takes a long time and careful analysis of the applicant’s credit history adds even more time may be categorized as a con, especially if the applicant is looking for a fast way to acquire money.

The applicant must be through and careful while researching a lender for his Personal Loan, as there are scammers looking to make a quick buck by pretending to be loan brokers and requesting an up-front processing fee, which may be as much as three thousand dollars. Another way a fraudulent loan broker can cheat an applicant out of his identity is to retrieve personal information and using it elsewhere. It is important for the applicant to check the background of their prospective lenders in order to check their validity.