The widespread use and popularity of personal loans is due to fast loan approval, which is usually associated with a small loan amount and its relatively short duration. That is why the number of such loans issued does not decrease even during the financial crisis, and many banks make personal lending the main focus of their work. However, only a few borrowers take full advantage of loans for personal needs, so it would be logical to consider the issue in more detail.
What is a personal loan?
A personal loan is a loan that is issued mainly to individuals for the purchase of any consumer goods or services. However, mortgages or car loans are generally considered separate types of loans. The main features of personal loans are their short duration, which rarely exceeds 1.5-2 years, as well as a small amount compared to the already mentioned mortgages and car loans.
Quite often, a personal loan is issued in the form of an installment loan – a type of contract involving a loan that is paid off over time with a definite number of scheduled payments.
Types of loans
Currently, there are several types of personal loans that can be classified by their various parameters:
- Non-purpose loan. Such loans are issued in cash or by credit card. An important feature of such loans is a higher interest rate as compared to the purpose loans, as well as a smaller loan amount. Despite this, according to many financial analysts and specialists in the banking services market, this particular type of consumer loans is the most common;
- Purpose loan. It is issued by the bank for the purchase of a specific product or service. Often application and funding takes place directly in the store, where the borrower has already picked up the purchase he or she needs. Often this type of loan is used to pay for various services, for example, treatment or a tourist trip;
- Express loan. It is a relatively new type of lending, which is provided in most cases online. The main features of such fast easy loans are a high interest rate and a small loan amount;
- Credit bank card. This option of applying for a loan when the borrowed funds arrive at the client’s card is rapidly gaining popularity. The reasons for this are the simplicity, security and convenience of the funds transfer procedure, combined with the ever-increasing number of cards held by individuals.
Of course, in addition to those described, there are many other types of personal loans, however, the most common ones are given above.
In most cases, lenders and banks set fairly loyal requirements to potential borrowers. This is explained by the small loan amount and its short term, which is the main characteristic feature of such loans (if we consider mortgages and car loans as separate types of loans). Another factor that allows credit institutions to reduce the level of requirements for personal loans is a higher interest rate, which also compensates for some of the risks of such financial transactions for banks and lenders.
As a result, the usual conditions for approving a personal loan through FNB online are:
- be a U.S. citizen or legal resident;
- be 18+ years old (19+ in some states);
- be employed and have a stable source of income;
- have a valid email address and phone number;
- have an active checking account in your name.
How to apply for a personal loan?
Until recently, to get a loan for consumer needs, a mandatory visit to a bank was required. At the same time, the procedure for filling out and submitting the necessary documents was quite quick and simple, which is not surprising given the high level of competition in this market segment. A client would simply not work with a bank that makes excessive demands.
However, in the last 3-4 years, an increasing number of applications for easy cash loans are submitted online. This is explained not only by the convenience of such a procedure for the client but also by a serious increase in the volume of Internet commerce. As a result, the purchase of one or another product can almost entirely occur on the net: starting from its selection, continuing by submitting an online application and obtaining a loan, and ending with the repayment.
Interest rates on personal loans
One of the most important parameters of any loan is the size of the interest rate. Obviously, it can fluctuate quite a lot depending on the type of loan being issued and the organization issuing it. It is important to understand that the often declared interest rate is noticeably different from the real one, taking into account all additional commissions and payments of the borrower associated with obtaining a cash loan fast for personal needs.
Another option for lowering the interest rate is its concealment in the value of the product. That is why, when choosing a suitable quick easy loan, you should carefully study the conditions of lending, paying close attention to hidden interest and payments, as well as prices for similar goods in other stores.
Pros and cons of personal loans
Like any other banking product, personal loans have both quite obvious advantages and certain disadvantages. The pros include:
- low requirements for the borrower from credit organizations;
- purchase of goods or services, which would be difficult without borrowing funds;
- the ability to submit online applications to several different banks;
- quick application review;
- the ability to repay the debt early (usually without penalties).
The shortcomings of personal loans are:
- a relatively high interest rate;
- increase in the total cost of the loan due to interest paid;
- an increase in the financial burden, which especially negatively affects the borrower in the event of a crisis;
- the need to pay penalties for late payments.
Personal loan refinancing
A large number of personal loans issued before the onset of the next crisis has led to the fact that quite often today, a single borrower has several loans at once, and their repayment makes up a significant share of his or her income. Naturally, this situation has led to a marked increase in the level of non-payments and delinquencies. As a result, refinancing and re-crediting of consumer loans have become extremely popular and recently demanded banking services in the market.
The purpose of such actions is the borrower’s desire to get a loan on new, more favorable terms, and it will be used to pay old personal loans. The consequence of refinancing is to reduce the financial burden on the borrower and restore his or her solvency. Almost all major banks provide refinancing services today.
Can I get a loan without proof of income?
Several banks and lenders issue personal loans without checking their customers’ income. Of course, in this case we can only talk about small amounts and a short loan term. Another option for obtaining cash for consumer needs is applying to various lenders, whose requirements for potential borrowers are much less stringent than those imposed by banks. However, in this case, you will have to pay a much higher interest, sometimes reaching up to 1-2% per day.
How many years is a personal loan?
The most frequent duration of a personal loan is 6-12 months. In some cases, its term is extended to 2 years, when it comes to a more serious purchase. A long personal loan is rare in practice.
Can I get a cash loan?
Today, there are two main options for obtaining the borrowed funds. The first of them involves transferring money to a card or a bank account already available to the client or specially made for this reason. This method has recently become increasingly popular, due to its convenience and safety for the borrower.
The second option involves the receipt of cash directly at the bank’s office. Until recently, it was the most popular option, however, today it is being used less often.
How is a personal loan repaid?
Today, almost all banks and financial companies provide customers with a choice of several repayment options:
- using terminals or ATMs;
- postal order;
- transferring funds from a card using Internet banking;
- transferring funds from electronic wallets, etc.
Early loan repayment
Repayment of debt earlier than scheduled allows the borrower to save part of the money by reducing the overpayment on the loan. At the same time, a credit institution does not have the right to charge any penalties for early repayment of a loan, which was often practiced earlier.