A personal loan, sometimes referred to as a consumer loan, is the money you borrow from a bank, credit union, or online lender and repay over two to seven years in fixed monthly payments. The interest rates on these loans can range from 6% to 36%.
Personal loans are becoming more and more popular across the USA. Personal loan debt has nearly tripled in the last decade, going from $55 to $162 billion. The number of people holding a personal loan has almost doubled from approximately 11 million in 2010 to around 21 million in 2020. The average amount of a new personal loan is $6,825.
Consumer loans can be an acceptable option for non-discretionary objectives, such as debt consolidation, even though it's usually advisable to use your savings or emergency fund to handle unexpected needs. Personal loans are widely used to cover expenses like
- Medical bills
- Debt consolidation
- Home improvement project
- Refinancing an existing loan
- Weddings, vacations, and other discretionary costs.
Are Personal Loans Secured?
The majority of personal loans are unsecured, which means they are not backed up by assets such as your car or home and instead rely on your creditworthiness. However, you can be offered a secured or co-signed loan if you don't qualify for an unsecured one. Secured loans are supported by valuable collateral, and the lender has the right to repossess it if you default. Co-signed loans require a second applicant with a good credit history to guarantee the loan and be accountable for missing payments.
How to Choose the Best Offer in the USA
Examining a personal loan's annual percentage rate is one of the most acceptable ways to assess it. The annual percentage rate (APR) is the entire cost of borrowing, which includes interest and other fees. Before applying, you should compare rates from several lenders. The loan with the lowest APR is the cheapest and, in most cases, the best option.
Besides, lenders may either require a hard pull that can affect the borrower’s credit scores or provide money without credit history verification. The second variant is better for those who have poor credit scores or no credit history at all. However, no credit check personal loans can come with high-interest rates.
The Application Procedure
Nowadays, online lenders providing online personal loans in the USA are top-rated in lending money, as their requirements are less strict compared with traditional banks or credit unions’ obligations. As long as the borrower chooses the website that he is going to work with, he should now fill out the online application form suggested by the website. Personal information will be required by the application, which will include:
- Surname and first name
- Year of birth (at least 18 years old)
- Address of your residence (Residency in the US)
- Contact information via email (for notifications about loan procedure)
- Number to call (for more detailed information)
- Government-issued identification and a social security number (to apply as a legal citizen of the country)
- Source of income (as a recognizance that you will repay the debt)
- Checking account that is currently active ( to have money transferred into it).
After you've completed the application, you should submit it and wait for the lenders' response. Because multiple lenders are reviewing your claim at the same time, you have a reasonable chance of being approved. In addition, your money is promptly paid into your bank account if you are authorized by one of the lenders.