Last Updated on Apr 3, 2020 by James W
When you are in need of quick money at lower interest than credit cards then there is always a personal loan available for you. The beauty of this loan is that it does not have any strict eligibility criteria except that you need to have some income to qualify for it. If you are over 18 years and have a source of income, you can qualify for a personal loan.
It is this flexibility in the loan structure that makes it wide reaching. Another aspect that adds to its attraction is that no reasons whatsoever have to be specified for taking the loan. This is a major difference that personal loans have with all other types of loans that are specifically meant for some purpose that has to be established by the borrower at the time of taking the loan.
Personal loans have caught the fancy of Americans who are now greatly attracted to it. The popularity of personal loans is growing very fast and as per figures available the number of borrowers for personal loans in 2015 was 13.7 million. Another very interesting point to note is that consumers with good income and good credit scores mostly avail personal loans. Since the interest rates of personal loans are lower for such people, it is natural that they are more attracted to it. Availability of personal online loan has helped to boost its popularity.
Using personal loan
Although personal loan can be used in any manner, the best ways of making use of this facility have been discussed in this post.
When you are making a major purchase or planning for debt consolidation the cost of money can be kept low by availing personal loan that entails much lower interest than other loans including credit cards. Interest on personal loan can be well below the two digit interest that is charged on credit cards. Indeed, your income and credit score has to be good to get lower interest. FICO score between 680 and 739 which is considered good can translate into interest ranging from 5.5% to 9.3% for personal loans. For credit cards, fixed interest rate is 12.9% and the variable rate is 15.9%. A clear saving between 7 to 10 percent is what you can expect.
Substituting home improvement loan
Personal loans can also be used in place of home improvement loans that are available in the form of line of credit against home equity. Although the rates of interest of line of credit and personal loans do not differ much, personal loans are available in only 2 weeks as compared to the usual 4 to 5 weeks that it might take for arranging the facility for line of credit. The underwriting process line of credit is lengthy as it entails verification of appraisals and meeting requirements of government guidelines.
The market for personal loan is getting competitive as more lenders are now offering this facility. The better you are in shopping around, better are the prospects of getting loans at lower interest.
About the author – Michael Hunter is a journalist and writes on a variety of topics in economics and finance. How the scenario of personal finance has made a turn around since the recession of 2008 is captured in his writings. Following the latest trends, especially the availability of personal online loan he shares information about what is going on in the financial market.