Every year, millions use personal loans to pay for unexpected expenses, consolidate debt, make home improvements, make purchases, pay for their education, and more. Personal loans can be very beneficial, but before you take one, you must ensure you’re getting the right personal loan for your needs. Here are six quick facts about personal loans.
Facts about personal Loan
Table of Contents
What Is a Personal Loan?
A personal loan is an installment loan, where you borrow a fixed amount of money and agree to pay it back with fees and interest in monthly installments within a given period. Once you’ve paid back your personal loan in full, the provider closes your account, and you apply for another loan if you want more money.
Where Can I Get a Personal Loan?
You can get personal loans from traditional lenders like banks and credit unions, alternative lenders like payday or online lenders, pawn shops, title loan companies, private lenders, and more. Some lenders may offer you a personal loan adding to more than the amount you need.
Why Do People Take Personal Loans?
People often use personal loans for different things like home renovations, cars or furniture, debt consolidation, education, gifts, emergencies, and vacations. It’s important to understand that you’re taking a loan, and think about why you want the money before you take it.
Types of Personal Loans
There are two main types of personal loans — secured and unsecured loans.
- Secured personal loans need collateral, otherwise you’re unqualified for the loan.
- Unsecured personal loans don’t need collateral. The lender can decide whether or not you qualify for a loan and how much is based on your credit or financial history.
How Much Can I Take for a Personal Loan?
Most personal loan providers offer various cash levels ranging from $100 to $50,000 to be paid within a predetermined period. The payment term for most personal loans is between six and 60 months, depending on the provider, with some extending to 84 months. The amount you qualify for often depends on your credit health.
How Do Personal Loans Work?
When you go for a personal loan, you agree to make regular payments of a given sum. Here’s what to expect if you’re looking for for personal loan in Canada:
What to provide a lender
Lenders often require proof that you have:
- A bank account
- A regular income
- A permanent address
They’ll use this information to run a credit check, which they use to evaluate whether you qualify for a personal loan and your ability to repay the loan. Your credit score, credit report, and debts will affect your loan options, interest rate, and personal loan type.
How are you getting your loan from the lender
Once approved, the lender will give you the money in one of the following ways:
- On a prepaid card (credit card)
- In cash
- Deposit it into your bank account
- Send it to you as an e-transfer
- Send it to other lenders to repay your loans if you’re consolidating debt
Endnote
Before you take out a loan, understand everything it comes with, including fees, insurance, rates, and more.
