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Personal loans are general purpose loans that are offered by banks. You can use this type of loan for things like a home improvement project, unexpected expenses and consolidating debt. There are unsecured personal loans and secured personal loans.

 

The borrower doesn't have to give any asset as collateral for unsecured loans. This means that, if you default payment, the lender can't seize your property. If you're unable to complete paying the loan, the lender has no property to seize. The lender, however, can try other collection actions. This includes reporting you to credit bureaus, filing a lawsuit against you and using a collection agency.

 

A secured loan, on the flip side, is supported by an asset. If you can't pay back your personal loan, the lender can seize your asset as payment. Items offered as collateral may include cars, houses, land title deeds and business assets.

 

Personal loans range between $1,000 and $50,000. Your personal loan amount is based on the lender, your credit rating and your income. You have access to more cash if you have a huge income and an excellent credit score.

 

Personal online loans come with fixed interest rates. The interest rates are based on the credit rating. You may receive lower interest rates if your credit score is good. This means that you won't pay much on top of what you borrowed. A number of personal loans contain variable interest rates. Hence, your payment fluctuates because the interest rate changes periodically. A personal loan with an inconsistent interest rate is difficult to budget for.

 

Usually, there's a fixed repayment period for personal loans. The loan period is provided in months. For instance, you can be required to pay in 60, 48, 36, 24, or 12 months. Sometimes, the interest rate depends on the repayment period. Often, longer repayment periods increase interest rates.  Also, you can get a pre-payment penalty. This is a fee charged for repaying the loan early. Avoid personal loans that come with pre-payment penalties. Know more about loans at https://en.wikipedia.org/wiki/Loan.

 

Most banks report loan account details of their customers to credit bureaus. Your credit score is included in the loan account information. Every step in the loan application process affects your credit. To maintain a good credit score, make your loan payments on time.

 

 

When applying for loans, check for any hidden or additional fees and scams. Don't take a loan from a lender that requires you to send cash to secure a loan. Also, some lenders charge added fees for their services. Therefore, it's wise to check for additional fees prior to taking a loan. Carefully go through the terms and conditions of the loan to see if there are any extra or hidden charges.