With the state of the economy being so uncertain, a lot of people have been facing financial hardships and trying to figure out ways to cope with unemployment, medical expenses, foreclosures, bankruptcy, and other issues. Bills and expenses don’t stop if you lose your job, or if you’re having problems finding work. A great way to help you out through these tough times is by getting a personal loan. Personal loans can be very beneficial for people looking to get some extra money for the holidays, or to pay for expenses until they get back on their feet.
What are Personal Loans?
Loans generally fall into two categories, business or personal. Business loans are used for business purposes such as inventory, salaries, bills, or other expenses. They are usually for larger sums of money and have very detailed loan terms and provisions. In fact, many business owners consult an attorney when getting business loans. On the other side of the spectrum, personal loans are available for individuals who need money for non-business needs such as car repairs, medical costs, bills, small house repairs, and other smaller expenses.
People usually seek business loans from banks or credit unions, whereas personal loans can be found from a variety of lenders. Recently there has been a move towards using private lenders for personal loans, especially for small amounts. This is due to the fact that a lot of banks are increasing interest rates and denying personal loans due to the number of people that are defaulting on their loans.
Personal loans range from small amounts such as $100 or larger amounts for thousands of dollars in some cases. And the terms can be as short as a week or as long as 5 years or more. Several factors are used to determine the terms of your loan, and it will differ with each lender.
Some of the factors that lenders look at when determining the amount they will approve and the interest rate of the loan are your credit, income, and your other expenses.
- Credit: Depending on the type of personal loan you get, your credit can play a substantial role or a minor roll. For bad credit personal loans, your credit is hardly a factor in determining whether or not you will be approved for the loan. Your credit score will weigh heavily when reviewing whether or not you will be approved for a traditional personal loan though.
- Income: Your income will usually play a big part in determining how much your personal loan will be approved for. If you are making 6 figures a year, lenders feel you can pay back more money than someone working part time making less than $20,000 a year. For bad credit personal loans, your income will play a bigger factor in whether or not you are approved for the loan.
- Other Expenses: Although rare, some lenders will want to know how of your money is going to other expenses before they approve your personal loan. This is because they want to see how much you will actually be able to pay towards the loan each month. Your other expenses are usually more of a factor for larger loans, not small personal loans.
Personal Loans for People with Bad Credit
If you have bad credit and need a personal loan, there are options available. Bad credit lenders offer bad credit personal loans for people who have low credit scores. Some people are under the misconception that just because you have bad credit, you won’t qualify for personal loans. However, bad credit personal loans are available and can really help you improve your credit score.
Be aware that if your credit is bad, the interest rate will likely reflect that. This is because lenders will view the loan as a higher risk than lending to someone with superb credit. If you’re interested in lowering the amount of interest, look into secured personal loans. These loans require the borrower to provide collateral in exchange for the loan. But don’t let your credit stop you from getting the money you need.