Significance

• Without personal bank loans, some consumers would not have money to pay for college tuition, get out of debt or start a new business. Although banks take a risk with each loan, personal loans are useful and necessary. The average person does not have a sizable savings account. Therefore, they may rely on credit cards or family to meet a large expense. However, personal bank loans give consumers access to quick cash. Persons with acceptable credit can usually apply for a loan and have funds within a few days.
  
  

Types

• There are different types of personal bank loans. Secured personal loans are common, and these loans require borrowers to have collateral. Collateral is a personal piece of property that secures the loan. In the event of default, the lender can claim the collateral as repayment for the loan. Hence, the value of the collateral must be equivalent to the personal loan amount. Banks also offer unsecured personal loans, which do not require collateral. However, these loans necessitate an excellent credit history, and some lenders require a minimum credit score of 750.
  
  

Misconceptions

• Although it is easier to get approved for a personal bank loan with collateral, having collateral does not guarantee approval. Lenders take several factors into account. For example, they have to assess whether a borrower has a good payment history. Persons who habitually submit late payments to creditors, and person with a high debt-to-income ratio may not qualify for a personal bank loan. In this case, the lender may consider the applicant too risky and deny their loan request.
  
  

Features

• Personal bank loans are attractive because they normally carry lower interest rates than credit cards. In addition, the loan terms are usually fixed. Thus, borrowers can pay off the loan within a set time frame, and they do not have to carry a balance for an unknown time period. Approval notifications are sent relatively quick; and borrowers can receive a check for funds within days. Once borrowers receive the cash, they can use the money for any purpose.
  
  

Warning

• Applying for a personal bank loan creates a new monthly expense. While useful, personal loans can become financially burdensome. To keep payments low and manageable, borrowers should borrow a small amount of money, and resolve to pay off the loan as soon as possible. Personal bank loans have minimum payments. However, doubling or tripling the monthly minimum can quickly reduce the balance. Additionally, borrowers ought to contact at least three lenders and compare personal loan rates.