Personal Loan

Back in the days when banks were the only lenders in the business, getting a loan meant putting on your best clothes to go to a stressful appointment with the bank manager. You’d sit there for some minutes, feeling like you’re facing the school headmaster and bracing yourself for humiliation. Things are much better these days.

Banks used to have the market for personal loans all to themselves and were the only business entities that could offer personal loans. Because of this, they were able to charge you extortionate rates, confident in the knowledge that the borrower had no other choice. Well, it’s a little different now. The market is open, which means that banks are no longer the only ones from whom you can get your personal loan. There are loads of places where you can apply for quick personal loans. And because of the increase in supply of consumer credit, the rates have become increasingly competitive.

You can find loan providers everywhere. Supermarkets, gas suppliers, junk mail, television, and magazines are only a few of the places where you can look for personal loans. However, with so many places to choose from, where do you start?

Personal Loans – The Beginning

Let’s start at the beginning. What is a personal loan? A personal loan is money lent to an individual by a financial institution for a specific personal purpose. The purpose does not include buying a house since that is covered in a different loan category. One main difference between a personal loan and a home loan is that most personal loans are unsecured. That means that there is no collateral provided and the only guarantee that a borrower can give the lender is his reputation for good credit. This is also one of the main reasons why personal loans have interest rates that are higher than most other loans.

The Factors to Consider

When you’re taking out a loan, it doesn’t really matter what your reason is. The main question is whether or not you can afford to make the monthly repayments.

To work out the answer for this, you will need to find out how much you can afford on monthly repayments. Do your calculation by looking at your monthly household income. Afterwards, find out what your monthly expenses are. These include your maintenance payments, food, outstanding debts, any bills, clothes, and any other miscellaneous spending money. Add all these figures and work out a safety margin of 10% just to be on the safe side. You will then take all your expenses and subtract them from your monthly income. What you have left is your available cash for your personal loan.