Money For Nothing: Is A Personal Loan Right For You?

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Daily life is more expensive than ever before thanks to technology, online shopping, rises in gas and electricity charges and increases in insurance premiums. Currently, the monthly cost of living in the United States for an individual is around $2,500, add in just one child and that amount nearly doubles. This means that the average cost of living adds up to almost $28,500 just over the course of one year.

With the holidays comes the endless lists of must have kids toys, not to mention top of the range gadgets, which means many families are worried about how they will afford Christmas. Personal loans aren’t something that you should take out lightly, often the interest rate is high, repayment charges can be costly, and banks are cautious about handing them out for no reason. However, if you’re looking to buy a new house, car, finance a new business or even take the family on an extended holiday a loan might be a solution to a tricky issue.

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Flickr Image Courtesy Of: Pictures Of Money

What Are They?

Banks, building societies and other lending companies are authorized to grant applications for personal loans, but there are a few things you need to be aware of. Unlike a business loan, where collateral such as your property, be it a house, other business or assets are secured against the loan in question a personal loan is unsecured. On the one hand, this means the lender won’t ask too many questions about what the cash is for, such as repaying existing debt, improving your home or on school expenses but it also means if you can’t pay it back they don’t have anything to collect in lieu.

How Much Could I Get?

If your credit rating is good and you can prove you’ll be able to keep up with all the repayments, your income is taken into account, getting a personal loan should be problem free. Regarding the money itself, an individual can borrow anything from $1,000 all the way up to $50,000 and in some cases far beyond that. However, do make sure that your monthly income at least matches or better still is above the loan amount. Defaulting on an existing loan can severely affect your credit score, leading to you being rejected for even a phone contract in future, not to mention running the risk of debt collectors and even a lawsuit.

How Do Repayments Work?

Luckily personal loans often have fixed interest rates. This means that just like the loan itself, the interest rate stays the same for the duration of the loan. If you have an excellent credit rating, then the better your credit score and the lower your interest rate amount will be. Depending on how long you’ve asked to keep the loan for, it can vary, your monthly repayment amount will certainly differ. A long term loan equals lower monthly payments, but you could end up paying more interest. Some loans even have prepayment penalties attached to them which means the client is subject to a charge for having the ability to pay off the loan early.

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