Neon Funding has joined Cobalt Advisors, Loan Credit 9 and Saxton Associates in flooding the market with debt consolidation and personal loan offers in the mail. The problem is that the terms and conditions are at the very least confusing, and possibly even suspect. The interest rates are so low that you would have to have near-perfect credit to be approved for one of their offers. Best 2019 Reviews, the personal finance review site, has been following Neon Funding, Cobalt Advisors, Saxton Associates, Hornet Partners, Piper Funding, Carina Advisors, Corey Advisors, Pennon Partners, Jayhawk Advisors, Clay Advisors, Colony Associates, and Pine Advisors, etc.).
According to recent studies, thousands of Americans are currently ridden with debts to their name. The situation is so alarming that 29% of all Americans have a more massive amount of credit card debt than the amount they have saved for emergencies.
With the current economic crisis created as a result of the COVID-19 pandemic, the amount of debt is only expected to pile up. With increasing unemployment affecting millions of Americans, while dealing with unforeseen medical expenses has led to a harder economic strain on individuals.
The ever-increasing list of expenses has become especially painful for people already overburdened by debt.
Although multiple relief acts have been invoked, they still lack the capacity to keep debtors afloat. In this situation, considering taking a personal loan could become a life-saving step for many. Lenders offer personal loans to individuals and struggling businesses that require immediate relief.
If you have been struggling to pay your dues or to stay afloat in this crisis, we have put together a comprehensive guide to help you understand personal loans and how to qualify for them.
What does taking a personal loan entail?
Personal loans are not much different from a credit card loan, a mortgage due, or an auto loan. A personal loan assists in achieving your financial goals by helping you pay your bills. It is also a great way to get out of credit card debt.
A personal loan is similar to other debts that require you to repay your dues in smaller monthly installments. A personal loan helps in making purchases of large sums, which wasn’t possible for you to afford before.
Personal loans can also be used in the debt consolidation of all your past dues of high-interest rates. Personal loans typically have much lower interest rates than credit card debts. Therefore, if you have more than one credit card loan, then a personal loan can help you in consolidating it while saving a lot of money in interest. This will help you manage your monthly payments much more comfortably than before.
Just like before taking any other credit, it is strongly recommended that you do in-depth research of all your options before taking the loan. Even though taking a personal loan can provide fast relief and a means to manage your financial goals effectively, signing up for any type of loan carries its risks.
Before agreeing to any terms, you need to be entirely sure that you’ll manage to repay the monthly installments. You should also consider the benefits and drawbacks of all the other credit options in light of your specific situation.
Let us take you through the essential concepts and regulations attached to personal loans, that you’ll need to understand clearly before applying for a loan.
How is a personal loan different from other types of loans?
The primary difference between a personal loan and any other type of loan, like a credit card or mortgage loan, is the flexibility of terms of its use.
You apply to borrow a particular amount from a lender as your personal loan. The lender can be any bank, credit union, or online lender.
Personal loans give you the liberty to use the borrowed amount for any purpose you choose. For instance, a personal loan can be used to clear medical bills, buy expensive appliances for your house, pursue an education, use the loan in consolidating and help you erase your debt.
Although a credit card loan can also provide funds for the same expenses, the terms of repayment of credit card loans are very different from personal loans. When you get a personal loan, there’s an agreement for repayment of debt in predetermined installments over a period agreed by both the parties involved.
The installments are mostly divided into monthly payments until the total loan has been returned with interest.
You’ll need to understand a few personal loan terms before applying for one. We have explained all of them below:
Principal amount
The principal amount is the total sum that you borrowed. At the time of applying for a personal loan, you’ll have to mention a principal amount.
The interest on your personal loan is determined by this principal amount. The principal amount will keep decreasing as you keep paying off the monthly installments.
Term
The term represents the total length of time that your repayment installments are divided into.
Interest
The interest is the amount charged by your lender as a fee of providing you your required amount. It can be determined as a particular percentage of a loan.
The monthly installments carry an added interest charge, which is a dividend of the total interest you’ve been required to pay over the entire term
APR
APR or the Annual Percentage Rate is the total cost of your loan. Some lenders may charge an extra fee with the interest.
The APR is inclusive of both the interest and the extra fee if applicable. APR is used to compare personal loans to decide on one that suits your situation.
Requirements of a personal loan
Your credit score and credit history is reviewed by the lenders when you apply for a personal loan. Better interest rates and easier terms are offered to borrowers who have good to excellent credit scores.
Another factor that comes into consideration when assessing your application is your debt-to-income ratio. This ratio represents the total debt you owe each month and the sum of your income.
Personal loans are a type of unsecured loan, which implies that you don’t need to put any of your assets at stake, as is the case with other loans. Personal loans are supported by your credit score and history.
However, a few lenders might provide the option of secured personal loans, while offering better interest rates on them.
Conclusion
Personal loans are an excellent option in times of emergencies and can also help with debt elimination.
Personal loan requirements vary from lender to lender. It’s crucial to assess multiple lenders to figure out the best option for you before you sign on any loan.
