Personal loans are one of the loans you can apply for and use for general purposes. The lender does not restrict the borrower on where to use the funds. It can be used for purchases, education or even capital used to set up a business. Personal loans are often harder to get approval from because of the qualification that is required. When considering a personal loan, here are a few points that may help you understand the loan prior to getting one.
Fixed amount and rate paid on a fixed payment period
Personal loans are loans which are specific in three areas: amount, rate and payment period. A fixed amount is granted by the lending company in manila based on the credit standing that a borrower may have. Most lenders base the amount granted on the borrower’s income and capacity to pay. Once you have been approved of the loan, the amount granted will bear an interest that is fixed and often compounded annually. This is the charges that the lender will charge for letting you borrow the money. To pay off the amount borrow with the interest it carries, the entire loan will be paid on a fixed term which can vary from 12 months to a few years.
Personal loans are unsecured loans
One reason why personal loans carry high interest and difficulty in approval is because of the reason that they are unsecured loans. The lender does not require any collateral or lien on equity to grant a loan. The loan is granted fully based on the banks credit investigation and evaluation. Although there are no collateral and lien on the borrower’s asset, there are still other ways where a lender can forcefully collect from the borrower such as a lawsuit.
Longer term, more interest
A personal loan will be paid at a fixed term to be agreed between the lender and the borrower. Although a borrower may be granted a longer term, we need to keep in mind that the longer the term, the more interest we will be paying the lender back. Keeping the loan on a short term will help you eliminate the debt earlier and with less interest.