Personal loans are designed to help the borrowers cover personal expenses such as home renovation, wedding ceremonies, medical bills, vacation costs, or unexpected bills. These loans can be secured, meaning that the borrower should bring collateral or unsecured that do not require a pledge. Personal loans are offered by banks, online lenders, and credit unions. The debt should be covered within a fixed term with interest rates. Sometimes, lenders charge extra fees for personal loans.
How Much Is Offered for Online Personal Loans?
When it comes to the amount, interest rates, or other fees for the personal loans, they can vary greatly. Personal loans are somehow like installment loans that allow the borrower to obtain a fixed sum of money. Meanwhile, personal loans are different from such installment loans as student loans, education loans, car loans, or home loans.
The amount for personal loans depends on the lender, the borrower’s credit history, and some other factors. Some lenders may offer less than $100, while others up to $100,000. However, this range does not decide how much the borrower will be approved for. The amount depends on the type of loan the customer chooses.
Sometimes, lenders can limit the usage of a personal loan. For instance, the borrower may not be able to pay tuition fees as the lender restricted it.
How to Apply for an Online Personal Loan?
For getting an online personal loan, the borrowers should complete a loan application form suggested by the online lenders. After submitting the application, the lenders review the completed form and decide whether to deny or approve it. If approved, the borrower is represented the loan terms, which can be either accepted or rejected by him. If the client agrees with the online lender’s terms, the next step is funding the loan. Generally, the transfer is done via direct deposit into the bank account of the borrower. After having money in hand, the repayment period starts according to terms established between the lender and the consumer.
The Importance of Credit Report for the Online Personal Loans
As mentioned above, personal loans are approved according to the credit scores of the appliers. The higher the score, the higher the possibility of getting approved for the loan is. Besides, with higher credit scores, people can apply for higher loan amounts. Sometimes the lenders may have minimum credit score requirements.
Online lenders always carry out credit history verification to clarify the credit scores and review other factors as well. If the credit scores are good, but the borrower has got missed repayments, the claim can be denied.
Annual income is also essential for lenders, and they often have minimum income terms. Furthermore, they will calculate the debt-to-income ratio to see whether the borrower will be able to make monthly payments on time as agreed.
Interest Rates for the Online Personal Loans
Interest rates vary according to the terms of the loans, loan amount, the lenders’ requirements, and the borrower’s creditworthiness. According to ValuePenguin, people with excellent credit scores ranging between 720 and 850 can take a personal loan with 10% APR, while those with poor credit are offered loans between 18% and 36%.
Compared to credit unions and banks, online lenders provide personal loans with the lowest interest rates ranging between 5% and 36%.
As the online lenders may differ from each other with their requirements, it is highly recommended to research and find the best suitable option before applying for a personal loan.