As every person can have their own hitches when it comes to their finances, whatever help financial institutions can offer could be very alluring to help mitigate some problems or to meet financial goals. Availing of personal loans is one way to access money aside from a set income. It is made possible through an agreement between a borrower and a lender and may be bound by legal terms. Personal loans are basically debts which a borrower has to pay over a specific period of time, with the added expense of paying interest - an avenue by which lenders earn profit.
Types of personal loans
Personal loans are manifested through different kinds of borrowing such as mortgages, car loans, credit cards, etc.
The use of credit cards is the most famous form of personal loan. A credit card is basically a small plastic card which a person uses as payment for different kinds of goods and services from merchants. The cardŐs issuer, which could be any accredited financial institution, holds a revolving account and makes a line of credit possible for a person. Credit card loans require payments every month, with an additional interest rate dictated by the issuerŐs terms.
Another famous form of personal loan is car finance. It is a type of secured loan as the car itself is pledged as security for the repayment of the loan. In the event that the borrower fails to handle his obligations, the lender will be forced to sell the car in order to recover the amount lent. There are two types of car loans: a direct car loan and a personal car loan. A direct car loan is one where the borrower is directly credited with the loan in order for him to buy a car. Otherwise, the indirect loan involves the intermediation of a car dealer between the bank and the loaner. Car loans often encompass a short period of repayment time which is directly proportional to the useful life of the car.
On another note, there are also mortgages available in order to secure real property such as a house. Mortgages are personal loans done through a legal mortgage note. Just as it is in a car loan, the real property becomes the collateral. There are many aspects of a mortgage which one should take note of such as the size of the loan, its maturity, and the interest rates. In places where persons are deemed to have insufficient purchasing power for real property, mortgages are very helpful. A mortgage is closed when a person has paid in full the amount owed or when an unlikeable foreclosure ensues.
The need for being responsibleThe need for personal loans could not be more emphasized in todayŐs world of unstable finances. Whatever personal loan a person may avail of, the basic premise stands that he should pay what he owes. As it is for a responsible credit card owner, a good credit score entails his credibility as a personal borrower. If one is resilient enough to even meet his monthly repayments, his stand on personal loans becomes better.