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Bank Personal Loans: Your Friend in Time of Need

A friend in need is a friend indeed and this is exactly what the bank personal loans turn out to be. These short-term cash offerings not only provide you with adequate cash when you need it the most, they do contribute to the credit score. Your credit requirement for an urgent expense gets fulfilled; at the same time your creditworthiness enjoys a real boost, what more you can ask for.

It is necessary to have a thorough understanding of the different terms and conditions that come along with any bank personal loan. You can strike the best deal only when you’re fully informed and totally aware. Here are certain details that you should know before you approach the bank for some financial assistance.

Types of bank personal loans

Bank personal loans can be of two types,

  • Unsecured bank personal loans - Here the bank doesn’t ask for any collateral and as a natural corollary, the rate of interest is high

  • Secured bank personal loans - Here the borrower has to document suitable collateral and he/she is offered a better deal in terms of repayment schedule and rate of interest

Underwriting requirements

In order to obtain any loan, the borrower has to fulfill certain conditions as specified by the bank. Now the requirement may very well vary from one bank to another. Many a time the requirements are determined by the prevailing economic climate; for instance when the economy is healthy the bank doesn’t trouble to approve the loan application. But when the economy is in a bad shape the approval takes time, the requirements are more in number and the rate of interest shoots up. But there are certain factors that are common in case of one and all.

The common factors are,

  • The borrower has to be a US citizen

  • He/she should be of 18 years of age

  • He/she should have a stable or permanent source of income

  • The application should be backed by a good credit record and of course impressive credit score

Well, there are lenders who don’t take into consideration the credit score of the borrowers. In fact, they purposely target the customers with bad credit. For such loan they can charge higher interests, and so the income of the bank goes up. Besides, under the present circumstances, it is very natural that most won’t have the perfect credit score. Poor credit personal loans are the only rescue option for them, no matter how expensive the option at hand is.

But good credit score has its own advantages. Not only the approval of such short-term cash loan depends on such score, even the rate of interest to be charged is determined by the same. The rate of interest and the credit score share an inverse relationship; one goes up the other goes down. It is convenient for the borrower if the rate of interest goes down, but for that he/she needs to have a good credit score.

Repayment schedule

Like any other loan, borrowers need to pay back bank personal loans within a definite period of time. The time is of course determined by the bank. It varies from 12 months to 30 years depending on the loan itself. The rate of interest charged, the principal amount borrowed and several other factors are taken into consideration before the repayment schedule is fixed.

Once the schedule has been fixed, it is the duty of the borrower to pay back the entire sum of money along with the interests in installments as per the schedule. Usually, there is this flexibility to decide whether the installments have to paid every month or once in four months or for that matter once in a year.

Another point to be taken care of is the early payment penalty. Banks earn money from the interest on outstanding loans, when the borrower decides to pay off the debt early the bank is bound to lose a few dollars. They try and make up for the loss by charging an early payment penalty.

Pay on time, improve your credit score

Once the loan amount gets credited to the borrower’s bank account, it is time for him to chalk out a repayment plan. To be true, he/she should have such a plan ready even before applying for the personal loan. The moment you receive the money, each and every credit activity of yours will be monitored by the credit rating bureaus. How organized and well planned is your repayment schedule, the bureaus take that into account while adding or subtracting point to your kitty. Late payment or a payment missed can leave a spot on your credit history, they add to the financial burden at the same time.

Money borrowed has to be returned eventually, the earlier you repay the better it is for your credit record.

Word of caution

Bank personal loans, no doubt are a great option to solve your financial worries. But there are a few points that you need to work upon before you sign off on the deal, for that matter before you even apply. The points to be considered are;

  • Assess your financial situation well, you need to know whether you can afford the loan at all or when can you afford the loan

  • It is important to pick the most trustworthy lender in the town, it is the name that has carved out for themselves prompt them to offer a fair deal to the customers

  • Comparative study of the different options available, compare the rate of interest as well as the repayment schedule

  • Check over the loan document before signing off on the same, read through terms and conditions thoroughly

Budget management without any financial assistance would have been a dream option, but a dream far-fetched under the present circumstance. However, a prudent management of bank personal loans can make the situation a little better.

Bank personal loans come really handy during financial hardship. You may use our loan search engine to find the best lenders of the industry to get a loan from.

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