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Best Personal Loans
Applying for a personal loan online in many cases is simple. The initial application process may only take a few minutes. Information varies from lender to lender, but you’ll most likely be required to provide your address, estimated credit rating, employment status, income information and Social Security number.
Further supporting documentation such as your address and proof of income may also be needed. This information basically helps the broker or lender to determine whether you are a candidate for a loan. The three major credit-reporting agencies will also be used to verify your credit. In fact, many lenders run what is commonly known as a “soft credit check.”
As with most loans, scrutiny of your credit rating is done. Each lender has its own requirements, but you’re more likely to obtain a personal loan if you have a dependable, steady income and a good credit. If you have never used traditional lines, such as a mortgage, auto loans, or credit cards, to establish credit, then the lender may simply consider your payment history with utilities or rent.
Interest rates can vary greatly. If you possess a good credit, then you stand high chances of getting a competitive rate. If your credit is bad or marginal, you can expect to pay a much higher rate, or you may not receive an offer at all.
Lenders may also evaluate your income. Many have minimum income requirements, and these actually vary from lender to lender, but normally the requirement is a few thousand dollars monthly, mainly depending on the size of the loan and of course your debt-to-income ratio.
Loan Fees To Consider
The interest rate is actually the first fee to consider. These rates vary greatly. Just a few percentage points can eventually bring about a significant difference, so you will certainly want to shop for the best rate possible.
Another loan expense to consider is the origination fees. Well, not all loan companies include this fee. The origination fee is normally deducted from the loan balance. For instance, if you get a loan of $8,000 loan and the creditor charges an origination fee, then your initial deposit will be the full $8,000 because the origination fee has been deducted.
The third and las fee that you need to consider is a check-processing fee. Nowadays, most companies include an additional charge to process check payments.
There are several differences between payday loans and personal loans. Consumers might have different purposes in mind when looking for a loan. Credit requirements may also vary.
Personal Loans
These types of loans are usually in the thousands, are repaid over a few years, and take into account your credit rating and history. Consumers take personal loans simply to fund expenses that a traditional loan may not be able to cover. They use personal loans to basically consolidate debt, which includes medical and credit card debt; to fund a relatively small business loan, or to cater for home repairs. Some people even use loans to fund various events like vacation and weddings. But the most important thing to the lender is your ability to repay the loan and not exactly what you plan to use it for.
In most cases, personal loans are unsecured and don’t require any collateral. Individuals with marginal credit may also qualify for this type of loan but with the help of a cosigner.
Payday Loans
These loans are usually small, short-term and available to those with high-risk or marginal credit. They are commonly referred to as payday loans simply because, originally, the loan term lasted only until the next payday. Consumers usually take these loans to pay for emergencies or sometimes to cover for living expenses. From an expert point of view, these loans should be a last resort because they come with burdensome fees
How Are Personal Loans Funded?
Not all online personal loan services are bank funded. Some are funded by individual investors. Characteristically, investors are re-paid the amount they loaned with an interest. Well, this is a bit different from peer-to-peer lending, as it’s more of an investment for individuals with capital.
Your Rights As A Consumer
Lenders are legally obligated to protect certain consumer rights. Legal documents are usually confusing and the loan process can undoubtedly be overwhelming. Maybe you are unsure of the best questions to ask. Below is a list of your consumer rights and the questions you are entitled to ask. This isn’t a complete list. The Federal Trade Commission (FTC) website offers some helpful resources in the consumer information section of its website.
Some of your rights include the following:
- Credit decisions cannot be based on your race, color, national origin, or gender. Credit decisions can, however, be solidly based on your current financial status. If you feel discriminated unlawfully, then please contact your state attorney general’s office.
- Reveal your marital status is not a must especially when applying for a loan in a non-community property state.
- Creditors are not allowed to discriminate if you receive public assistance.
- Within 30 days of applying for a loan, one should be able to receive a notification informing them about the rejection or acceptance of the loan application.
You have the right to ask for the following:
- If your loan request has been denied, be bold to ask why. There may be information on your credit report you may not be aware of, or there may be incorrect information. You also have the right to obtain a free copy of your credit report.
- Inquire about the total cost of the loan, including interest, fees, and other charges. Whilst a low monthly payment may be enticing, you may eventually discover, on closer analysis, that it is not in your best interests.
- Request clarification on any terms or legal language you do not understand. Do not sign any type of legal agreement if you do not fully understand the terms.
Avoiding Personal Loan Scams
You should be very concerned with offers that seem too good to be true. Loan scams are real. Consumer-rights groups usually warn consumers about loan scams.
The following are ways can use to protect yourself:
- Always be doubtful of unsolicited loan offers. If you get any mail or phone call that you didn’t request, you should be cautious.
- Be wary of lenders that have no interest in your credit history. All genuine lenders and banks will evaluate your credit history.
- Verify that the lender you are considering is registered in your state.
- Do not make any upfront payments before you have received your loan funds.
- If you are using a loan broker, ensure that you always verify the institution or bank. Do proper research. Physical locations should be thoroughly investigated.
- You will need to be extra cautious if you have bad credit and are seeking a personal loan.
In conclusion, there are several legitimate lending agencies readily available to assist those with marginal credit. In addition, each state provides free resources to those desiring to improve their credit. In many states, it is the Consumer Credit Counselling Service that can assist you