Personal loans are very popular among various segments of the population. With their help, you can solve many issues related to study, business, recreation, debts, buying necessary things. All banks offer a variety of loan programs, including a personal loan. Specially created credit organizations offer the high popularity of loans in their turn.
Personal Loan Comes First
This is one of the leaders in personal loan lending. It is issued by the bank to an individual for any consumer needs that should not be associated with a business. It is imperative to pay attention to the fact that additional fees and commissions are levied on a personal loan with an instant cash advance (hidden interest rate). This increases the percentage of such a loan. Therefore, in order to know exactly what percentage will have to be paid on a personal loan, it is important to calculate its full cost.
Common Types of Personal Loans
To better understand this issue, you should study the types of personal loans:
Target and Non-Target
The target loan is issued on a specific purpose (buying a car, rest, study, etc.). At the same time, the bank does not give out money but transfers the funds to the supplier of goods or services. A personal loan is more profitable since it has more convenient maturities, and the interest rate has been lowered.
A non-target loan is issued to the person being credited, no reporting is required on it. But the conditions are already more stringent.
Secured and Unsecured
Secured are issued on the security of property or with guarantors, as opposed to unsecured.
By Terms
- Short-term up to 1 year;
- Medium-term – up to 5 years;
- Long-term – longer than 5 years.
By The Lender
They are issued by banks or credit institutions. Various commercial organizations may offer full personal loans but conditions are worse. Receiving at the bank is not so simple but there are guarantees and variability of the conditions for the return of funds.
Pros And Cons Of a Personal Loan To Pay Off
Benefits of a Personal Loan
- Expanding your capabilities. For example, if you need to save up for several years to buy a summer house, then by taking a loan you can use what you want, paying a certain amount monthly;
- Receipt of goods until full repayment of its value. This point is the main one when deciding to take out a loan. The product may disappear from the shelves, and manufacturers may stop importing or producing it;
- The ability to repay the debt in small installments;
- Few documents for processing a consumer loan. Often it is a passport and salary certificate;
- Fast approval. In a few days, you can get a loan agreement;
- Purchase of goods in the required configuration at the moment;
- Availability. Due to the great competition, banks and lending organizations are forced to frequently revise the conditions of issuing loans in favor of the customer;
- Choosing a bank and credit conditions. There is an opportunity to compare and choose the best option yourself.
- A personal loan is free of charge;
- Quite a small percentage for the use of funds (compared to other types of loans);
- Buying a product today will save you from price increases in the future. This plus is very controversial because you have to pay not only the purchase itself but also the interest. However, this is an undoubted advantage.
Disadvantages of a Personal Loan
- Overpayment of a loan, and accordingly an overpayment of goods or services;
- Cut your budget considering monthly fees;
- Strict conditions for delayed loan payments;
- Age restrictions. The average age of the borrower is 22-55 years;
- Recognition of only the official salary. Most on paper receive the minimum reported salary which is reflected in the income statement required to provide the bank. Even if the income is much higher, it may not be counted. Or the percentage is charged more.
- It is also impossible to get a personal loan if you work without registration. It should be noted that some banks and organizations in a highly competitive environment skip this point, recording the monthly income from the words of the loaned.
- Psychological aspect. The money still needs to be paid monthly. One gets the impression that the money is given just like that. Some are so imbued with this idea that they stop paying off the loan which leads to serious consequences.
- Long-term payments. There is no guarantee that a person will be able to pay off the debt every month for several years. Force majeure is possible: illness, job loss. Usually, this is not considered. The bank can take back the purchased item for which the loan is paid against the debt. Thus, it is lost, and a large amount has already been paid to the bank to pay off the debt.
Is It Possible to Pay a Personal Loan Off Using a Credit Card?
When you use the balance transfer service, you can continue to use your credit card. If you want to make purchases on the balance of the credit card limit and take advantage of the interest-free period, taking into account a personal loan. You will need to fully repay the entire amount of the debt on the account statement. This will help avoid interest.
Remember that interest on credit cards is high, consistently higher than consumer credit. If you make a balance transfer on favorable terms, then you can not cover the entire debt. Then you will transfer the remaining amount of debt from your credit card. Next, you will be charged a commission and the interest rate will start to apply. It is impossible to name the exact amount because it depends on your tariff.
