Personal Loans from a Bank

Answer 1

Money is needed for a wide range of personal needs. People might need extra money to cover school tuition, pay money to their taxes, pay for repairs to their vehicle or even consolidate payments for their credit cards. In situations where a specific loan is not available, consumers might turn to a personal loan from the bank as a means to pay for their financial needs.

What are Personal Loans:

In basic terms, a personal loan is a type of unsecured loan the bank offers that covers personal financial needs. Banks typically offer two types of personal loans: a close-ended loan or a personal line of credit.

Close-ended loans are the type of basic loan most individuals might think of when they hear the term personal loan. This type of personal loan sets up a repayment schedule before the loan is taken out. It is usually paid off within one to two years and is ideal for situations like car repairs where a single payment is needed to pay the financial expense and then consumers have time to gradually pay the expense.

The second type of loan, a personal line of credit, offers more flexibility because it is similar to a credit card. The bank offers a maximum amount and consumers repay a minimum payment or more each month. Consumers can buy more than just the one time need, so it is ideal for situations like covering part of college tuition that will arise again later, but is repaid throughout the previous semester.

Requirements for the Loan:

Like most loans, the bank has a few basic requirements before it offers a personal loan to customers. One key requirement is a good credit score. Like any loan from the bank, a personal loan requires a credit check to determine the interest rate or if consumers are eligible for the loan. The second key requirement the bank will need is proof of income and information about current debts. This determines how much money the bank will make available for the loan.

Conclusion:

Personal loans are a great way to consolidate credit cards or pay unexpected expenses as long as you have good credit. Working with the bank is a legitimate way to obtain a loan and with a great credit score you can get low interest rates.