The Definition of Personal Loan

If you are like most ordinary people today, at some point in your life you will need money that you just don’t have, for car repairs, medical bills, school supplies for your children, etc. You can always rely on your credit cards, but who wants to pay those extremely high interest rates and fees? There is a better option, referred to as a personal loan. The money that you receive from a personal loan can be used to cover all kinds of expenses, anyway you like, just keep in mind, that you do have to pay the money you borrow back, plus interest. There are many places to obtain a personal loan from, local banks and loan companies, as well as internet lenders. Personal loans can bail you out of a fix, as long as you don’t borrow more than you can pay back, and you shop around for a good rate and repayment plan.

The average person, with a full-time job and decent credit, can borrow as much as $15,000 in the form of a personal loan. Don’t try to get the max you can, just get enough to see you through, because again, you will have to make those monthly payments, and the more you borrow, the higher those payments will be. Personal loans are different from lines of credit often available to you through your bank. The money you take out with a personal loan is given to you all at once, and you will not be able to get more until you have paid off a significant portion of your debt. With lines of credit, you are given a certain limit, and you can withdraw funds until you have reached that limit, pay the balance down, and get more funds as needed.

Again, depending on your credit, the amount of money you need, and your income, your personal loan may be either unsecured or secured. If your loan is unsecured, there is no property listed as collateral, but you will likely have to pay a much higher interest rate, due to the risk the lender is taking by giving you an unsecured loan. If you fail to pay the money back, they have no property to take from you to go towards the remaining balance that you owe, meaning that they will have to go through the legal process to get their money. If you have a secured personal loan, some piece of property that you own, such as your vehicle, land, home, etc., is listed as collateral, and if you default on the loan, the lender has the legal right to claim that property as repayment.

Your repayment time varies from loan to loan, in some cases, you will be given up to five years to payoff your debt entirely, and in others, you may only have a year. It depends on the policies of your lender, and how much money they are lending to you. The longer you stretch your repayment period out, the more you will be paying towards interest, so keep that in mind. Don’t accept a loan with payments that you can’t afford to make just to get lower interest, but don’t accept the longest term if you can afford otherwise. If you don’t fully understand the personal loan process, you should take the time to look into it, before you sign any paperwork, so you don’t end up in financial trouble.

Many people use the money obtained from personal loans to pay off high interest debts, such as credit card bills. You can save money in this manner, and it will be much easier for you to only have to worry about making one payment, rather than juggling several payments and due dates. Just don’t make the mistake of taking a personal loan to get yourself out of debt, and then turn around and amass even more debt, as this is how many people end up with bad credit and in bankruptcy. You have to take control of yourself, and resist the temptation to go into debt, payoff your cards and cut them up, and toss the applications you get in the mail immediately into the shredder, so you aren’t tempted to send them in. Credit cards are not a necessity, especially not now with so many prepaid cards and debit cards available, which can be used to rent cars, make airline reservations, etc.

Hopefully, you now understand personal loans, and a little bit more about how they work. Make certain that you check the interest rate, and make certain that you can afford the monthly payments, before you sign on the dotted line.

Citi credit losses to rise through middle of 2009 (Washington Post)

NEW YORK -- Citigroup Inc. shares continued to fall Tuesday, as the struggling bank disclosed it expects consumer loan losses to rise sharply through the first half of 2009.

Credit crunch hits local personal, business debtors (BizJournals)

When motor home purveyor Lonnie Hall went to inquire about a bank loan for his business this fall, he found himself quickly on the road back to his office, no cash in hand.

No deposit home loan on way out (Sydney Morning Herald)

The "no deposit" home loan is about to become a thing of the past.

ICICI cuts loan growth target (The Telegraph)

Mumbai, Nov. 18: ICICI Bank today said its loan book would grow at only 15 per cent this year, an indication that the bank could continue to remain cautious while lending to some retail segments.

Keep your credit score looking good (Fort Wayne News-Sentinel)

CHICAGO #8212; If you plan to wait out this housing downturn, intending to buy a home when the coast is clear, you'd better start checking your credit reports now. There may be some surprises waiting.