A personal loan is also referred to as a Signature Loan. Unlike a home equity loan or a car loan, a personal loan is not secured by an asset or real and/or personal property. Some banks would let you lend for only $500 while there are some also which would offer bigger amounts such as up to $20,000.
A personal loan can be used for a lot of purposes such as:
- • Debt Consolidation
- • Travel and Vacations
- • Miscellaneous expenses
- • Health expenses
- • Home improvements
- • Major purchases
Normally, banks and financial institutions offer a personal loan for a fixed rate and for a fixed term. They also usually offer the following:
- • 2 to 5 year term
- • Varying interest rates based on income and capacity to pay as well as credit score
- • Loan amounts ranging from $500 to $20,000
Understanding the Terms of a Personal Loan
The terms and conditions of a personal loan depend and vary greatly on the type of lending institution that’s offering it. Remember that a personal loan is generally unsecured, meaning that no collateral are attached on them. They are usually more difficult to obtain than those secured ones. Thus before approving a loan, borrowers need to first follow strict requirements in order to ensure their creditworthiness. Don’t worry though because even if the terms and conditions differ from one bank to the next, these lenders normally offer fixed rate of payment and interest and this must be disclosed before the contract of loan is executed.
A word of Advice
It is of paramount importance that before you will sign the promissory note and close the loan contract, you must first know and understand all its terms and conditions. If not, then it’s best if you’ll clarify those terms first with the bank or lending institution. Make sure also that your loan contract contains all the terms agreed upon by you and your bank and all these information have been disclosed in writing. If you want to be really assured, you can also discuss this with your trusted financial advisor or with your lawyer.