5 Must-Know Basics of Getting a Personal Loan

Thursday, November 29, 2012, 2:00 AM | 2 Comments

You have a minor emergency, and need a few hundred dollars, but don’t really want to ask your family or friends for help, then this may be a situation where you would want to turn to a small personal online loan.

The personal online loan was created as a response to consumers who needed small amounts of cash for only a week or two until their next paycheck or living expense funds arrived. Lenders saw a need to help consumers with these small loans made for very short periods of time (a week or two).

Even so, personal loan lending institutions often get blamed for a borrower’s misuse of these loan funds. That’s why they go to great lengths to inform consumers of the 5 must-know basics in getting personal loans of this type.

  1. Understand the Rates

    Personal short-term loans are just as regulated by federal laws as any other loans, and so must disclose their fees, interest rates, late charges, and payment methods. This information is found in the loan terms and conditions.

    As a consumer considering a loan of this type, it’s important that you understand what is expected of you; how you are expected to repay the loan; how much you are expected to pay for the term of the loan; and the consequences of your being late in the repayment.

    As these are short-term unsecured loans and often available to consumers who have had past credit issues the interest rate will be higher than that of a standard loan. However, these loans are also authorized faster, have very few requirements, and best of all, you can pay them back quickly.

  2. Comparing Terms is Important

    Personal loans of these types just like other types of loans come at different costs. You will find those with much higher interest rates and stricter repayment terms than others. Because of this it is important as a first time borrower to compare different personal loan terms and costs to find the loan that best fits your needs.

  3. Repayment

    Personal loans have strict repayment regulations. They require a loan be repaid fully in a short period of time, usually no longer than a month. When you don’t meet these terms then you can expect high interest rates, penalization, automatic bank account withdrawal of penalized interest amounts and more. This is the reason it’s important you understand the loan requirements and terms.

  4. Application Requirements and Authorization

    To apply for these loans, you don’t need to fill out a lot of paperwork, have a good credit score or be a long-term client. The application process, especially if conducted online, is very fast and the requirements are very basic. Even so, you do need to have a bank account (otherwise, where will the money be deposited) and you do need a secure job or income.

    Note: you must show proof of identity, income (last paycheck) and a bank account number. The online application only takes a few minutes, and authorization is offered within an hour or two. Once authorized, the loan amount agreed upon is deposited into your account.

  5. Credit Score

    While it is true that this loan can come at a high interest rate, it is also true that these are relatively easy loans to qualify for. They are often used by consumers needing to improve their credit scores. When the loan is authorized and then paid back on time, this positive information is added to your credit history, and over time can help increase your credit score.

Bottom Line
A short-term personal loan is not a bad thing. It does have a higher fee and interest rate which compensates for the lack of on-going interest payments over several years. Still, this is a viable and acceptable option for many consumers.

Peter Coppola is a personal finance and insurance expert. He mainly writes for personal finance and insurance blogs. Click here to learn more about short term finance options.

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  1. 2 Responses to “5 Must-Know Basics of Getting a Personal Loan”

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