Personal loans are a common way for individuals to secure cash to fund their individual pursuits or projects. They are among the best loan types that you can secure from a bank because you get a specified amount which may be relatively large and feature a fixed interest rate and a fixed repayment duration. This makes it easier for the borrower to structure their payments until the loan is paid in full.
What to expect in terms of loan amount and fees
In the U.S, a personal loan usually offers a loan amount above $35,000, while the repayment duration of life of the loan spans from 12 months to 2 decades. There are a few fees that you should consider other than the interest rate at which you agree to make the repayments. There is also an origination fee, which may be as low as 1% and as high as 8% depending on the lender. Note that some banks may not charge an origination fee.
Another fee to look out for is the annual percentage rate or APR. The APR for your personal loan might be high because these types of loans are usually unsecured, which means that the bank is going into riskier territory by loaning you the money.
What do you need to do to qualify for a personal loan
Your bank will consider factors such as your ability to repay the loan, and so you should first have a reliable source of income. They will also evaluate your credit score. A good credit score will increase the likelihood of your loan application being approved.
You should also aim to have a low debt-to-income ratio, and this will allow you to negotiate better rates even for mortgages and other types of loans. Also, consider visiting different lenders to see what they have to offer. This will allow you to compare the rates and eventually help you decide which lender to choose.
Personal loans may come in handy, especially in emergencies where you need money urgently. If structured well, you can secure a personal loan that will allow you easy monthly payments at reasonable rates.