In 2018, more than a third of Americans had an unexpected expense that incurred $5,000 or more. Another 22% had an unexpected bill of between $2,500 and $4,999.
But what’s even more unfortunate is that 60% of U.S. adults admitted they didn’t have the means to cover a $1,000 emergency.
So, how about this year? Well, 55% of Americans aren’t expecting improvements in their financial situation. 12% of that number even think it’ll worsen!
This doesn’t have to be your case though. So long as you know how personal loans work, you can make them work for and not against you. You can use them to get out of a financial pinch without digging yourself a deeper hole of debt.
Ready to learn how? Then let’s dive right into it!
What is a Personal Loan?
A personal loan, also known as an installment loan, is money you can borrow from a bank or online lender. You pay it back in monthly increments, hence, the term “installment”. You and the lender will agree on how long (as in the number of months) you pay it back.
Personal loans are often (and best used as) short-term loans. They also have smaller borrowing amounts than say, a mortgage. But you don’t have to pay them back as quickly as you would a payday loan.
Most personal loans are also unsecured loans, which means you don’t need collateral. Secured loans are like mortgages and auto loans, wherein the home or car is the collateral. Non-payment of these loans can lead to the “repossession” of the property.
How Personal Loans Work: Fixed Term, Fixed Interest Rate
So, how do personal loans work?
When you take out a personal loan or payday loan online, you’ll have to make two choices: the loan amount and length of repayment time. The loan amount is the amount of money you wish to borrow. The repayment time, or the “term”, is the number of months given to you to pay back the loan.
Online personal loans no credit check may have a higher interest rate than offline loans, but it’s still a fixed rate. Also, this rate is often much lower than what you’d get with a payday loan. Because it’s fixed, the rate stays the same throughout the term, so you’ll pay back the same amount every month.
Personal loan terms are also fixed, so you’ll know that you’ve paid off your debt after that time. You can choose from three or six months, or depending on the lender, even up to a year.
Since most personal loans are short term, the amount of money involved is often smaller. But this can still range from $100 to $5,000. Some even let eligible borrowers take out a $15,000 loan.
Convenient Online Application
Today, personal loan lenders won’t ask you to go to their offices, line up, and fill out dozens of forms. The entire process takes place online.
Taking out a bad credit personal loan online often starts with creating an account with the lender. This is how you’ll receive notifications from them, especially approvals and payment reminders.
Once you’ve created your account, it’s time to request your loan amount! Provide the details on how much money you need to borrow and the length of time you want to pay it back.
Lenders would ask you for your date of birth, social security number, and driver’s license info. This lets them confirm that you’re an actual person and that you’re 18 years old.
You also need to provide your complete address and mobile phone number. To verify you can pay back the loan, you’d need to give details about your source of income.
Make sure you have a valid bank account where the lender can wire or deposit your loan. This would be the same account the lender will take your loan payments from.
To increase your chances of loan approval, provide a bank statement. This shows that you receive regular salary payments through this bank account. This helps speed up your application since lenders will know that you can indeed pay back what you owe them.
Why Personal Loan Over Other Types of Loans?
A study found that personal loan applications through banks had a 76% rejection rate. That means three in every four applications get rejected!
So, it’s no surprise that one of the reasons people apply for personal loans is the higher approval rate. Especially since many personal loan lenders don’t perform hard credit checks on applicants. Some even have specific loans for bad credit individuals.
Besides, online personal loans are so convenient to apply for. You don’t have to travel to a physical brick and mortar office, which can also mean bumping to people you know. You can apply anywhere, anytime, given that you have access to your bank statements.
There’s also the one-day processing of most online personal loans. If you apply now, you can get an offer on the same day! Accept that offer, and you’ll see the money in your bank account either the same day or the next business day.
Boosting Your Chances of Approval
Most personal loan lenders don’t use credit scores as an eligibility factor. They care more about your current (and future) financial status. That’s why you should provide them bank statements proving you can pay back your loan.
Also, be sure to choose a payday loan no credit check amount and term that will make your monthly payments affordable. The monthly payment shouldn’t be more than 15% of what you make every month. By borrowing a smaller amount, lenders will be more at ease knowing you can pay it back without issues.
If you have a working debit or a credit card, you should give their info to the lender too. It’ll act as a sort of back-up payment method if you run into trouble that leaves your bank account without money. Lenders can use your debit or credit card to take out the payment for your loan instead.
Apply for a Personal Loan Now
Now that you know how personal loans work, you can see that it’s much better than a payday loan. They’re also much more convenient than bank loans, not to mention easier to qualify for.
But make sure you practice good borrowing habits and borrow only what you can afford! That way, you can pay back what you owe on time and not rack up more debt.
Ready to get quick financial relief through personal loans? Then make a loan request now! We can help you get access to that money you need in as little as one day. Here are some other articles you might find helpful:
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