Personal loans 101: How they work and who can qualify for them

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Unlike credit cards, personal loans offer a fixed interest rate, fixed repayment term, and fixed monthly payment.

Personal loans can be used for debt consolidation or major home remodeling projects.

Most personal loans are unsecured, meaning you don’t have to put down collateral to borrow money.

Read on to learn more.

When you need cash, there are several reasonable ways to get it.

You may be able to get a small loan from family or friends, and you can always apply for a credit card. But, there’s another option to consider that comes with certain advantages — and that option is a personal loan. While personal loans have gotten a bad rap, they can offer a predictable way to borrow money.

It all starts with how personal loans work. Unlike credit cards that charge variable interest rates and come with fluctuating payments that vary depending on how much you spend, personal loans let you borrow a predetermined amount of money with a fixed interest rate and a fixed repayment period. They also come with a fixed monthly payment you can agree to ahead of time, which makes budgeting for your loan a whole lot easier.

Personal loans can also come with a low interest rate depending on your credit worthiness. Where the average APR on a credit card is now over 17%, interest rates on personal loans start at around 4% APR for consumers with good or excellent credit.

Keep in mind that we’re talking mostly about unsecured personal loans for the purpose of this article. While unsecured personal loans don’t require any collateral, another type of personal loan known as secured loans do require …read more

Source:: Business Insider


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