PERSONAL LOANS - LOW INTEREST

When faced with a large unexpected financial obligation a personal loan can be a godsend. Many people aren’t completely sure what exactly a personal loan entails and how it differs from a loan such as home loan or a car loan.  Primarily the difference is in the security.

A car loan or a house loan is secured. In the event the loan is defaulted the car or house will then become the property of the lender.

A personal loan has no collateral that can be obtained in the event of the loan not being paid back. Due to the unsecured nature usually the maximum amount available is often no more than $1,500.

When applying for a personal loan a creditor will first check for a steady income and a job that has been held for a number of years rather than multiple jobs over a shorter period of time. A credit check will be given most of the time; however, some creditors do not deem this step necessary.

The interest rate of a personal loan is also much higher than a secured loan and can be as high as 21% if you have a rather low credit score. Check with your lending institution on the interest rate before you sign for the loan. The loan will often be approved, the pay schedule established and the money deposited within 24 hours of the application.

Low Interest personal loans can also be obtained from a professional organization that you belong to such as one in which you have established credit cards with. In this case often the total amount in which you are able to borrow can be significantly higher with as much as $25,000. Additionally the interest rate from your professional organization is often much lower; 3% to 8% is usually the standard rate.

Be aware that with most professional organizations that offer large personal loans with very low interest rates, the rates are low until you are late on or miss a payment.

In the event of a late or missed payment the interest rate will often automatically go to a significantly higher interest rate of 14% to 21%.

In today’s economy many people are finding it difficult to meet their monthly bills with their weekly paychecks and are often enticed by companies who are offering solutions to debt with a low interest personal loan to pay off other bills; consolidating them under this one loan.

While this may seem the solution needed, and indeed may just be a great solution, be careful of such a deal. Many of these lenders, offering low interest loans even if you have spotty credit make their money from the hidden fees and increases in interest if you are late on even one payment.

This could result in your payments being even higher than the payments you had before you consolidated your bills.

Additionally, a strict commitment to getting out of debt is needed to avoid paying off your credit cards with a loan and then running the cards back up leaving you in a no win situation.