Everybody is in quest of a luxurious lifestyle. Though luxury has different definitions for different people, things like a car, a home or a holiday in an exotic location are in the wish list of almost all. All these are not possible without the necessary funds. Managing funds is a very tough job, especially when it is about fulfilling a certain wish which does not belong to the daily routine. Loans help people to mould themselves to reconcile with the financial needs of the borrower, whatever it might be.
The market for loans is huge and extremely competitive and there is a customized loan for every kind of loan. There is a home loan for buying a house, a car loan for bringing home the selected car and a special loan for meeting the requirements of any kind of personal need. These loans are both unsecured and secured. Only some lenders render the loans taken for personal reasons, as unsecured, where there is no collateral involved. But, lack of collateral or security often metes out high-interest rates in the borrowing terms of the loans. This again makes the secured loans a viable option as they have a very low interest rate. This means that a security is responsible for approval of these loans and thereby the interest charged is less.
According to the needs and requirements of the borrower, he can apply for any one of the above kind of loans. The amount offered as loans for personal reasons is always dependent on the collateral which is offered, in case of secured loans. The loan term extends from 1-25 years. The unsecured loans range from 5 to 10 years. With unsecured personal loans, there is no need to review any collateral.
Personal loans are taken for various reason and the uses of these loans are endless. There can be umpteen number of uses to which the personal loans can be put to:
- Car purchase
- Home improvement
- Debt consolidation etc.
The personal loans are extremely popular for clearing off debts. The debt consolidation loans have a high interest rate which collates into a single low interest consolidated loan. The personal loans are much cheaper than some other alternatives like an overdraft, credit cards etc.
The eligibility criteria
The primary requisite for taking a personal loan is the credit score of the applicant. Any person who has taken a loan earlier has a credit score based on his earlier performance. It is a 3 digit number determining whether an applicant is eligible for a loan or not. It ranges from 300-850. A score below a certain limit is considered to be a credit problem and the lenders decide not to extend a loan to that person.
In this regard, one should keep in mind that a bad credit score, though considered a liability always does not prevent anyone from getting approval for loans taken for personal reasons. Even people with bad credit scores can get a loan, provided certain conditions are met. He/ She might be associated with defaults, bankrupts, arrears, foreclosures and late payments but he/she can also be given an opportunity to improve their credit score.