Can You Qualify For A Personal Loan?

18 July 2012 17:00 - Phoebe Robinson

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Can You Qualify For A Personal Loan?

Personal loans are small loans that allow you to borrow money and use it at your discretion. Personal loans often have higher interest rates than long term loans such as mortgages, but they have lower interest rates than credit cards.

Personal loans are easy to obtain. If you have a good credit history and a regular income you should have no issues getting the loan. There are two main types of personal loans, secured and unsecured loans. Secured loans require some form of your personal property as collateral; you will lose this collateral to the lender if you default. The other, unsecured loans do not require any collateral, but they do have higher interest rates to offset the risk. Moreover the documentation is much less hassle than if your applying for a mortgage or a larger loan. Once you have completed the application process and the loan has been sanctioned you can use the money for anything you choose. Unlike a car loan or a mortgage, the lender won’t ask questions as to what the money is going to be used for.

However there are some drawbacks, for example qualifying for the loan can be hard. You need proof of a steady income proof of employment, as well as information on you current debt situation is often required.  The rules on qualifying will vary between each lender. In addition to this if you have a poor credit rating you will be classified as high risk by the lenders so will be charged a high annual percentage rate, which could make it easier for you to default.  So make sure you can manage the loan before jumping into it.

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