All About Personal Loan 2020: Fulfill Your Aspirations with Personal Loans

01 Oct 2020

Personal Loans help you in fulfilling your aspirations. You can achieve what you have dreamed of always. Before discussing different aspects of personal loan, we would like to answer your W’s – What, Why, Who.

We all live in an unpredictable world that we need money at any moment of our life. It can either be planned like our dream holiday or unplanned like in case of an emergency. So what will you do at that time? You need some reliable and quick ways to get money.  Hence solution comes in the form of a personal loan for personal reasons.

A personal loan is the type of unsecured loan (signature loan) which helps you meet your current financial needs that are urgent and immediate without any security. A personal loan can be given on the basis of borrower’s credit card history and their capability to return the money at a fixed interval of time. If you have a good credit score, you can get the personal loan in a couple of days. Personal loans nowadays are planned in such a way that it will be budget friendly. You can get them at the fixed interest rate and for the fixed monthly installments. The interest rates of personal loans are subjected to vary from lender to lender.

Why take a personal loan if the credit card does the needful?

Now, the question arises that if you need to pay the interest then why not to take money from your credit card and why to go through a rather complicated process. It is because of the low-interest rates and amount of money lent.  The interest rate on your personal loan is much lower than that on a credit card.

There is no hard and fast rule that you need a perfect credit score to get a decent amount of personal loan. Even those people who have the average to bad credit score can explore the options and get the best deal out of it. You can take the personal loan for a short period which is usually between two to five years. The time of personal loan may be fixed in some cases, but it is flexible according to the customer’s requirement. Mostly personal loans range from $1000 to $50,000 depending on the bank/ lender, your need and credit score. Each bank has its own criteria and limits to provide personal loans.

Overall benefits of Personal loan

There are several benefits of a personal loan which you can easily avail, and they are as:

  • You will find the competitive fixed rates, fixed term, and monthly payments.
  • Some companies won’t charge you for personal loan’s origination or processing fees
  • There will be a discount to the customers who choose the auto deduction method for the payment.
  • The process will be a simple online application and funding process.
  • If you fulfill all the terms and conditions according to the lender, you get the loan on the very next business day.

Pre-Requisites to Get a Personal Loan

There are certain requisites you need to fulfill for a personal loan:

  1. Steady Employment: The most crucial requirement for a personal loan is to have a stable job. Proof of employment validates your personal loan application. When the lender pays the money, he is always keen to know where are you working and when will you return the money. Therefore, it is compulsory to have a permanent employee in some company.

  2. Proof of identification: When the lender lends the money he needs to see the person’s identification proof. So there will be a requirement of a driver’s license or passport copy before your bank approves the loan.

  3. Credit history: As it was the pre-requisite to know the credit card history of the customer, lenders do not want any defaulters, bankrupts profile for approving the loan. Hence, a clean credit card history is necessary.

  4. Minimum credit score: Before approving the loan a fair or good score of credit card is required. Banks usually considered the fair credit card record as 580 to 669 and a score of 670 to 739 is considered as good credit card score. Most companies require a credit card score of 600, but some of them need the higher ones according to their company norms.

  5. Eligibility: The amount of money lend by the lender depends on your salary as well because it is the right of the company to get the full details about the borrower in case of recovery of money.

Applying for a Personal Loan

  • Get to know about Lenders: As the company is getting information about the customer, it is your moral duty also to get the information about the lender. There is a website called Better Business Bureau, it helps you to get the relevant information regarding the lender. It can let you know about the negative points, complaints, and scams. The consumer gets the best loan after researching the lenders and then only selects the lender he can afford to repay.

  • Get interested rates and offers: When you request a rate quote from any company, you need to fill the application form, for instance, address, income and identification proof. Hence, this information will get into the lender's server, and you will receive a mail regarding your loan inquiry. It will give you the best interest rates and principal amount based on the information submitted by you.

  • Get the best loan term: The longer the term of your amount, the lesser you need to pay the monthly installment. Therefore, one needs to know how much monthly installment they can repay so that personal loan term can be decided as per the convenience.

Types of lending parties and varied aspects -

Each company has its own terms and conditions. So it is essential to read about each company before you start the procedure.

Types of lending parties:

  • There are mainly two types of lending parties one is a bank and another is peer to peer lenders. The banks which provide the personal loans are Earnest and LightStream. The peer to peer lenders is Upstart, LendingClub and many more.

Peer to Peer is those people who want to invest their money in the market to take the interest out of it. The benefit of getting money from these lenders is they provide you with the personal loan if you have the average credit score too. For instance, a bank provides you with the personal loan if you have the credit score of 660 but peer to peer will provide you with the loan at 600 credit score also.

The slight negative point of peer to peer companies is they provide you with the lower amount of personal loan at slightly higher interest rates as compared to banks.

  • Interest rates (APR – Annual Percentage Rate): The interests rates provide by the lenders are of two types – variable and fixed. The fixed rate is the same for the whole duration of the personal loan on the contrary; the variable amount gets changed throughout the loan term as per the demand of the bank. Variable rates are usually less than the fixed rate, but it was pure luck as the amount gets increased sometime during the term of the loan. Hence some customers prefer to stick to the fixed amount of rates.

  • Personal loan Period: Personal loan period is purely depend on the consumer’s wish that how much he wants to lend, how loan the borrower wants it and what terms and conditions he wants to agree on. As personal loans are available for a short time which is usually from one to seven years. Henceforth, if you have a longer period of the loan lower the monthly installment will be. But in this case, you need to pay more interest rates. But if you can pay the higher monthly rates, then you can go for the shorter period of the loan. This will benefit you more because you can fulfill your requirement in the less interest rate.

Some of the lenders provide discounts on interest rates depending on the mode of payment. As you have opted for the autopayment, SoFi offers you a discount of 0.25 percent and Lighstream provides you with 0.50 percent. These auto deduction methods help you in a dual way as you get the discounts and secondly you won’t miss the monthly installments.

  • Origination Fees: Once you apply for the personal loan make sure in mind you need to pay the processing fee which is also called the origination fees. Origination fees are usually that amount which lender will charge to administer the whole process.  Some companies like Earnest won’t charge you, but on the other hand, most of the lenders charge you the origination fees up to one to six percent.

  • Penalty:  The biggest concern of any lender is to get the recovery of their money. If you pay the loan amount late, then it will destroy your credit card score. Some lenders charge a penalty fee to recover the amount. Hence the auto deduction method is the best way to get rid of the penalty amount.

Best Personal loan companies of 2020

U.S. News evaluated personal loan companies on the basis of eligibility, loan term, fees, repayment method, and some additional features.

On the basis of above criteria the best loan companies are:

S.No

Personal Loan Company

Loan amount

Loan Period

Credit Card score

1

LightStream

$5000 - $100,000

2 -7 years

Not been disclosed

2

SoFi

$5000 - $100,000

3 -7 years

680

3

Earnest

$5000 - $75,000

Up to 5 years

680

4

Discover

$2500 - $35,000

3 -7 years

660

5

LendingPoint

$2000 - $25,000

2 - 4 years

580

6

LendingClub

$1000 - $40,000

3 - 5 years

600

7

NetCredit

$1000 - $10,000

0.5 – 5 years

Not been disclosed

8

FreedomPlus

$7500 - $35,000

2 - 5 years

600

9

Upstart

$1000 - $50,000

3 - 5 years

620

10

Prosper

$2000 - $40,000

3 - 5 years

640

11

Peerform

$1000 - $25,000

Up to 3 years

600

12

Best Egg

$2000 - $50,000

3 – 5 years

700

13

Discover

$2500 - $ 35,000

3 – 7 years

Not been disclosed

14

Rocket Loans

$2000 - $35,000

3 – 5 Years

640

15

Payoff

$5000 - $ 35,000

2-5 years

660

 

Henceforth the first reminder to get the personal loan is that do not limit your search when you are looking for the best unsecured personal loans. Peers to peers companies are convenient, but the banks and credit unions will provide you with the most impressive offers if you have a good credit score. On the contrary, you will find that one of the online lenders will provide you with the better offers if you are fit in their burrowing profiles. Hence it is very compulsory to see the pros and cons of each option and find the best one for you as per your requisite.

All in all, you get the money as per your choice and requirement without lending it from your relatives or friends and getting the embarrassment. So you have your personalized loan to fulfill your financial dreams. It can either be your house renovation, your dream holiday, your car or anything which will help for your future betterment.

We are happy to introduce that our fintech company “Afinoz”, we are committed to helping you in the fulfillment of your dreams by providing you with the personal loans. The best part of our process is - it is very simple, easy, quick and a hassle-free. We will give you the best deals with the best interest rate and with more exciting features that will give you comfort in the way you want.

Image source: Shutterstock

Read More