Personal loans are offered by financial institutions such as banks, credit unions, and savings and loan associations. There are different types to choose from, including mortgage, consumer, auto, and student loans.
Personal Loans and Requirements
The choice between secured and unsecured loans depends on many factors such as the amount required, purpose, credit score, and others. As a rule, mortgage loans come with a longer repayment term and lower rate of interest because collateral is required. Banks accept different types of collateral, including real estate holdings, vehicles, collectibles, and others. The presence of collateral means that banks take less risk because the asset is used to guarantee repayment. When it comes to unsecured debt, financial institutions take different factors into account such as debt to income ratio, creditworthiness, income sources, length of employment, and others. Your credit score is the most important factor that shows banks whether you will be able to meet your monthly payments. The choice of lender is also important – you may want to contact you local bank first if you are a regular customer. Another option is to apply through an online bank. They usually offer attractive terms and interest rates. There are many benefits to choosing an online bank, among which convenience and safety. In addition to loans, they offer checking and savings accounts, and clients benefit from online customer service.
Peer to Peer and Other Lenders
Peer to peer and payday lenders are other options for borrowers who are dissatisfied with brick-and-mortar institutions. Peer to peer lending offers benefits to both individual lenders and borrowers. Different platforms offer micro, student, and other loans to prospective customers. Some lenders feature affordable interest rates and no prepayment penalties. Among the main advantages are speed of funding, easy application process, and better chances of approval. Peer to peer lending has become increasingly popular among individual and business clients alike. A payday loan is another option for borrowers who face an emergency such as medical bill, car repair, and others. The main benefit is that individuals with less-than-perfect credit qualify, but the interest rate can be as high as 300 percent. Payday lenders claim that the interest rate is higher because of the higher risk of default. Peer to peer and payday lenders and banks are not the only players. In many countries, students can apply for government or federal student loans. This is one alternative to grants and scholarships that comes with affordable interest rates and payments. Another advantage for borrowers is that they are offered flexible payment solutions, along with extended repayment schedules. The interest rate is fixed which makes budgeting and planning easier. Skipping payments is not recommended because it results in higher lifetime payments. Public employees such as employees in non-governmental organizations, public school teachers, and government employees also qualify for loan forgiveness. This option is not available for private loans which also offer higher interest rates. The main benefit of federal loans is that the interest charges are subsidized.
Related resources:
http://www.yourloan.ca/loan-articles/personal-loans/
http://www.cucentral.ca/SitePages/Home.aspx
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