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LOANS 101: Securing A Personal Loan

Whenever you need money, you probably have several ways on how you can get some—from asking your family and your friends to applying for a credit card. However, one of the best options you have is by applying for a personal loan.

Personal loans can often have a terrible reputation. But if you compare them to a credit card, you will come to realize that credit cards charge a certain amount of interest rate, and there is a fluctuation in interest rates too. However, personal loans can let you borrow a predetermined amount of money with a predetermined monthly installment and a fixed interest rate.

Kinds of loans

Basically, there are two kinds of loans, unsecured and secured loans. Unsecured loans do not need any asset as a requirement to borrow money. Whereas, to obtain a secured loan, an asset such as a car or any other material asset is needed.

Here are some bullet points to help you remember the essential information about unsecured personal loans:

-A fixed amount of money is borrowed.

-A fixed interest rate, fixed monthly installment, and a set schedule for all the payments are given to you

-The majority of personal loans are insecure. But it is possible to get a secured loan that is subject to collateral assets.

Why are personal loans needed?

Personal loans can be withdrawn for any reason whatsoever, like for remodeling your kitchen, buying a new TV, or even upgrading to your dream car model.

Personal loans are also often needed for debt consolidation—if you have a huge credit card, and you have to pay high interest with the bill every month, leaving you with empty pockets. Here, personal loans can help you out. Because of their lower interest rate, you can pay the hefty bill of the credit card and pay off your loan in small installments later.

How to qualify for a personal loan?

Some lenders can loan out money if the person has a credit score of up to 500’s. You may need to put down collateral such as a car to qualify, though.  At the very least, you might also have to pay a higher interest rate for taking out a personal loan.

Most lenders resort to listing qualifying minimum credit scores on their website. Most of them draw the line at 670 or 680. However, with a credit score under what’s deemed as “very good credit,” or 740, you’ll likely have to pay for a higher interest rate.

Most loan companies also require proof of employment for lending out loans, so make sure to get your credit score in good shape before applying for a loan. Just like buying a phone brand, compare offers from different lenders first.

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