There are instances wherein we needed money but don’t have any cash at hand. For the most part, we rely on our credit cards to temporarily cover for certain finances or expenses, whether they are urgent or otherwise. But then, there are some of us who find it hard to use credit cards, considering the fact that the interest rates for such can sometimes become a burden. This is why many of us look for certain alternatives to using these plastics, particularly for emergency situations. One of the other options aside from credit cards is taking out payday loans.
Basically, a personal loan is what a bank or a lender gives to a qualified borrower that is not secured to a specific asset like a car or real property. While such a personal loan is considered unsecured, there is also a type of personal loan that is deemed otherwise. Here, the loan comes with collateral, like a car or house. Asking for this type of personal loan may come with lower interest rates, but failure to pay off the borrowed money here could mean losing the collateral. Indeed, the risk of losing something makes the unsecured type of personal loan a viable choice for anyone who wants to borrow cash.
Availing of this loan can be made through a bank, lending institution, or credit union. Availing of a personal loan usually requires the individual presenting his or her credit score. It is through this that the bank, lender, or credit union would determine the likelihood of him or her becoming eligible to take out a personal loan. Indeed, the institution can provide the person a quote of the interest rate; if the score is better, then the rate would be lower. This only means that the individual is capable of paying off the loan over a certain period.
Meanwhile, here are some of the uses of the unsecured loan:
- Debt consolidation. Of course, many of us are faced with debts that we can’t wait to pay off. With payday loans, anyone can definitely breathe a sigh of relief after removing the burden of debt.
- Many students take out personal loans in an effort to obtain tuition for their schooling. This is mostly evident among college students.
- Home improvement or renovation. A personal loan may be enough to finance the renovation of improvement of a certain part of one’s home. This is a better alternative than taking out a home equity loan.
- Major purchases. Items that are considered major buys such as appliances can be obtained through the use of personal loans.
- Starting up a business would require capital, but not anyone has one right at the get-go. A personal loan can act as a stimulus plan in order to start the endeavor off on the right track.
- Vacation expenses. The loan can cover an entire vacation not just for the borrower, but for his or her friends or relatives. This is more suitable than using a credit card.
- Unexpected financial emergencies. It is definitely a hassle to go down with a sickness. While hospital bills and medications are sudden expenses, they can easily be covered by taking out the loan.
All of the abovementioned uses of personal loans may be possible with just the individual or borrower signing on the dotted line. In this unsecured loan, the bank or the lending institution is responsible for loaning the amount of money to the qualified borrower’s signature, which signifies that that the latter agrees to the terms and conditions of the loan and is bound to pay off borrowed money on a monthly basis. Depending on the amount obtained from the bank, lender, or credit union, the payment may run up to at least four to five years.