Personal Loans

Personal Loans

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What are personal loans?

A personal loan is a type of loan that can help you to cover your obligations. It is generally simple to get it because it doesn't require you to pledge collateral. It also doesn’t come with plenty of restrictions on how to spend the money. Unlike with credit cards or other types of loans, when you apply for a personal loan, you get a set amount of money that you pay in monthly installments. There are several places where you can ask for a personal loan. Some of them are banks, credit unions, and online lenders.

Now, due to the increasing numbers of online lenders and the ease of applying and approval process, more and more people opt for this option. However, it is worth mentioning that while it takes about ten minutes to apply online, approval may last up to a week, depending on how fast you provide all the necessary documents.

Though the process comes with less hassle, you need to know that personal loans also charge interest. Apart from the usual ones, you may expect to pay some administrative fees. It is something that lenders usually take out of the amount of loan once they approve it. But be careful – you will find that plenty of lenders also charge something called an early payoff penalty. While in some places, it can be appreciated when you pay back the loan before the end of term, online lenders are not too happy about it because it makes them lose their future interests.

If you are thinking about applying for a personal loan, you need to know the terms. Many of us are not familiar with words such as collateral, credit score, prime rate, and others, and this can be pretty confusing. Here are explanations for some of the most common terms you will hear from lenders:

  • Annual Percentage Rate (APR) is an amount of interest and cost you will pay to borrow money.
  • Collateral is something that you own and offer to a lender as a guarantee that you will repay the loan.
  • A Credit Report is a report that shows your credit history.
  • Credit Score shows the numerical data in your credit report.
  • If you don’t manage to repay the loan following the loan agreement, it will be considered in default.
  • If you miss payments or are late, the lender will consider your account delinquent.

Reasons to apply for a personal loan

One of the reasons why people apply for personal loans is that there aren't many restrictions relating to spending money. People are asking for these types of loans for different things. We will list a few to give you some ideas:

  • Some people already took other loans and then found that they have a hard time repaying them. In that situation, they opt for taking personal loans to get out of debt.
  • But then, you can apply for personal loans for entirely personal reasons. Imagine you want to propose to your girlfriend. However, you are on a shoestring budget, and the engagement rings are expensive. The loan can come in handy in that case.
  • The fact is that life can be quite unpredictable, and sometimes we need to cover expenses that we didn't plan. You may take the loan to cover the cost of car repairs, home repairs, or some urgent medical interventions.

How does the COVID-19 affect personal loans?

The pandemic didn’t cause only the health, but also the financial crisis. The concept of remote work admittedly came as a shock for many. However, it needs to be said that people who kept their jobs even if they had to work from home are lucky. Large numbers of folks in the tourism and other industries had harsh paycheck reductions, and many have lost their jobs.

But despite this economic fallout of the ongoing pandemic – applying for personal loans with low interests is still possible. Some lenders offer coronavirus hardship loans that are easier to apply for. Many lenders offer them as low-interest personal loans. Sometimes they come with a 0 % interest rate, too.

The process of applying for personal loans also hasn’t been affected by COVID 19. However, keep in mind that you will still need to show that you have a good credit score and verifiable income to qualify for the loan. Some lenders might have more rigorous requirements because of the pandemic.

Some people wonder about the possibility of getting personal loans for bad credit, so let's look into it. Lenders generally ask to see your credit report because it allows them to see whether you are a responsible borrower who will pay the loan back in time. It is still possible to apply and get personal loans with a bad credit score. However, the decision will depend exclusively on the lender. Many lenders will inform you straight away about their requirements. Some of them will meet the needs of borrowers with poor or nonexistent credit histories.

How quickly can I get approval for a personal loan?

You can request personal loans from banks, credit unions, and online lenders. An approval process is generally quick, and you should have the money in several days. However, it is important to know that some lenders have stringent requirements, and the whole process can take longer. In general, we can say that the time from the moment you apply to the moment you get approved depends on the lender you choose.

  • As a rule, banks have the strictest requirements. Since they are also for-profit institutions, they are likely to have the highest interest rates. The time it will take you to get approved varies from bank to bank.
  • Credit unions are, on another side, nonprofit organizations and serve to represent the interest of a certain group of people. They are owned by members and have looser requirements and lower interest rates. If a credit union approves your request for a personal loan, you can expect to get the money within one to five working days. Some can also complete the entire process and send you the money within 24 hours.
  • The fastest way to get approved is to apply for personal loans with online lenders. They provide loans even if you have bad credit. In most cases, the lenders approve loans within one working day.

Although you can't influence the lenders, there are several things you can do to speed up the approval process. Keep in mind that the faster you get approved, the sooner the money will be in your hands. Here are a few tips:

- Check your credit before applying because this will help lenders understand how you manage your finances. It can also help you choose the right lender.

- Make sure that lenders can access your credit.

- The best thing is to apply for personal loans online.

- Make sure your application is correct.

- Think about getting preapproved. Request for preapproval will make lenders conduct only a soft inquiry, which means they will not look into your credit score. It will also reveal your chances for approval.

How to choose the best personal loan lender?

When choosing the best personal loans lenders, you need to do quite a bit of research. Consider different options like banks, credit unions, and online lenders. Make inquiries about the interest rates, collateral, loan terms, etc., and compare the details.

Consider the amount of the loan, too. Following your needs, choose the amount that is sure to cover your expenses. Some people are looking only for small personal loans to cover basic car repairs, while others need large sums. Apart from that, check for processing and prepayment penalty charges. We heard people asking questions like, “Do I need to look for personal loans near me?” If you are applying for a loan from an online lender, the vicinity doesn't play a role, as the whole process happens online.

Final Thoughts

Personal loans are a practical financial tool to cover unplanned expenses or consolidate your debts. However, it is critical to manage personal loans wisely. That said, it is important to be fully aware of everything you agree to and to check your credit report before you apply. Additionally, think of a reasonable repayment plan following the agreement you make with the lender. Have you considered applying for a personal loan? Did you already take it? What are your experiences? Get our help!

Frequently Asked Questions

  • Earlier, we mentioned that personal loans come with interests and fees. These fees are the money you need to pay for the chance to apply for a loan, and they vary depending on the lender. However, we can mention some typical costs of these fees:

    • Application fees are somewhere between 25,00 and 50,00 U.S dollars.
    • Originations feels vary between 1% and 6% of the loan amount.
    • A prepayment penalty is between 2% and 5% of the loan amount.
    • The late payment fee is between $25 and $50 or 3% to 5% of the monthly installment.
    • Returned check fee is $20 to $50.
  • The best thing you can do is pay it off in monthly installments following the agreement with the lender. Of course, if you took the loan and now in a much better financial situation, you can pay it back sooner. However, you need to be careful because some lenders may want to charge prepayment fees.
  • The number of loans you can have at one time depends on the lender. Some lenders allow you to get more than one loan at the same time. You can also get multiple loans from different lenders. But before choosing to do this, think about the risks it carries. For example, paying back more than one loan can be incredibly hard to manage. Besides, it can affect your debt to income ratio, which can make applying for loans in the future more challenging.
  • There isn't a straightforward answer here, as it depends on multiple factors. Nonetheless, we can say that, in general, it is not hard to qualify for personal loans, but some are more difficult to get. In the case of unsecured loans, lenders often require that you have a 650 plus credit score. But, at the same time, some lenders approve loans for people with a poor or nonexistent credit score.

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What our customers are saying

Catherine Jones
Catherine Jones
9 / 10
EmpireFinance has low-interest rates and great loan offers. And no week-long waiting. You'll get the loan after providing your details and identity verification.
Jeff Gray
Jeff Gray
10 / 10
Do you find it hard to cover your expenses before payday? Here's the solution: Empire Finance. You don't even need to do any paperwork to receive money!
Stephanie Smith
Stephanie Smith
9 / 10
Finding a trustworthy lender is hard. You don't want your bank details to get into the wrong hands. So I was amazed to receive the loan from Empire Finance so quickly.
Anthony Griffin
Anthony Griffin
10 / 10
Quick and helpful support staff. Plus, the online service makes receiving the loan super easy. It won't fix your financial issues but helps for a month-end solution.
Andrea Hooper
Andrea Hooper
9 / 10
Lending was easy, and the money helped a lot. It paid for an essential bill. I will surely take advantage of Empire Finance the next time. I hope they'll start giving promo codes.