Personal loans are very good for consolidating high-interest rate debts of credit cards. This is because the cash deposits are usually direct into your bank account, allowing you to use it for any purpose. Online lenders also make the process easier.
Why do I need a bank account?
Lenders put a claim on the amount you owe them with your bank. This is how they get repaid. If you were to borrow without an account they would have no mechanism to get repaid. Loans without credit checks , or at lest hard credit checks always require this form of guarantee for the lender.
Getting a lender for best personal loans
You may be tempted to run up bills on your credit card. If you are undisciplined with repayments this can lead to a debt spiral which is difficult to exit. Consider a loan with fixed repayments if you are likely to spend on the never never with your flexible friend.
Features of small cash loans
- Receive the money as a balance on your account. Instead of a credit limit you will have cash on the account which can be spent with cash only merchants or to repay friends.
- Applications are considered instantly. You will know the same day if you will get a loan, and you will receive it as early as the next business day.
- Flexibility from lenders is high with regard to repayment.
- Loan sizes are small ranging from a hundred to one thousand dollars.
- Lenders offering small personal loans are less interested in your credit score than your ability to service the debt.
Disadvantages of personal loans
- Interest rates vary depending on your personal credit score. For instance, borrowers who have credit scores below average, end up paying very high rates. However, they are good for short-term financial emergencies.
- The up-front fee is non-refundable. If the loan has a fixed charge and you pay early, annual percentage rates end up becoming higher and you pay more.
- Once you finish paying off the debt, the chances of you using your credit cards again is very likely. This could be dangerous for your financial status.
- Personal loans lenders ask for income verification in many cases. They can also ask for employee verification. Because of this, the chances of you getting your personal loan are slower than an application for credit cards.
Getting best personal loan rates from the following sources:
Online lenders are accessible via Green Touch. These lenders make their decision based on your application form. Once they get in touch with you they will ask your for any documentation they need. Approval rates are high and lending s fast. Interest rates are high.
Banks prefer to make larger loans and are slow making decisions. They also have tougher guidelines on the borrowers they can accept. Banks are the best option if your credit score is good and you are not in a hurry to receive the funds.
Credit unions are similar to banks but may offer better rates. The downside to credit unions is they will not lend to you if you are not a member.
Avoiding debt traps
- Whilst it is tempting to repay your obligations with more debt, there is a cost and that cost increases with the time used to repay the debt. Never take on debt you cannot repay.
- Ensure your lender is a legal registered lender. Make sure that the lender is allowed to lend to you under your local state law.
- Always read the contract and ensure you re aware of the pitfalls. Consider what will happen if you kiss a repayment. If you are unsure, ask the lender before you sign.
- Drawing up a budget to guarantee you will be able to make the repayments. Don’t be tempted to skip a loan payment.
- Avoid payday loans whenever possible.
- Don’t sign jointly for a loan with another person. Doing so makes both signatories liable for the debt of the other.
Personal loans are good options, even for people with bad credit scores. There are many providers of the service, though the best place to borrow from is online lenders because of their flexible terms.