Lenders usually need to assess the general financial health of any loan applicant. But when it comes to personal loans, there are many more scrutiny checks before you can acquire the cash.
For example, private lenders and banks need to know the credit score from a trusted source, before they can approve a loan application.
However, a lot many people do not fit into this criteria.
According to a report, nearly 1 in every 3 employed people have a bad credit score. And therefore, cannot access the usual credit line. So, they usually need to take out monthly installment loans for bad credit from a trusted private lender. Thus, meeting their financial obligations, despite having a not-so-good credit history or score.
What are Installment Loans?
In simple terms, Installment Loan(s) are any debt that can be repaid in equated monthly installments (EMIs) fall under this category. It could be a car loan, a mortgage, a home loan, or in some cases, even personal loans.
Since this article concerns personal finances, we will be taking up only the personal loans hereafter.
Short Term Personal Loan Options…
For traditional loans, specifying the purpose is mandatory. For instance, you are only eligible for taking out a car loan if you are buying a car, besides other criteria. This is because the rates of interest levied on these proposed loans vary according to the need. To put this into perspective, the interests for a car loan and home loan are not the same.
On the other hand, when you cannot specify the reason or need to borrow money for personal reasons, these loans are not suitable. You would need to take out a personal loan. And it is noteworthy that the interest rates for personal loans are traditionally higher than other loans.
Here are a few options among the personal loans category that you can opt for when you need money for other reasons.
Installment Loans from Online Money Lenders
The simplest and most convenient way to take out an installment loan is through online money lenders. These lenders can offer as much as $100,000 for a tenure of 18 months on top. Besides, they usually do not require any security or collateral to be placed for taking out a loan.
Like any other installment loan, these loans are also eligible for EMI repayments. In fact, with online money lenders, you can better compare between banks and their plans.
Quite understandably, when you look for an online installment loan, your process for application is also much more refined. For instance, there is no paperwork involved. And to your surprise, you can expect to receive the money within 24 hours of your loan approval. Plus, you can expect to receive a loan even if you have a bad credit score.
As far as credit scores are concerned, it would be foolhardy to say that there are no checks at all. Every lender performs some sort of creditworthiness check on the loan applicant. But in the case of online installment loans, these checks are known as soft checks as there is no need for the lender to go through the applicant’s credit score or credit history.
Mortgage against High-Value Assets
Another form of personal credit is a mortgage loan. But, it is noteworthy that these loans are secured, as you’ll need to place collateral with the lender. Usually, a mortgage loan is lent out against property, but there are other forms to it as well.
For example, you can seek a mortgage against your high-value insurance policy. Or you can also take out a mortgage against mutual funds and other investments.
The criteria for taking out a mortgage is simple, you submit the collateral document. Depending upon the value of your asset, the amount for the mortgage is determined. And you are supposed to repay the debt in installments over some time.
However, there is a catch to this- since these loans are secured, it means that if you fail to repay the debt, the lender would recover it by selling out your assets.
Car Title Loans
You can also seek a personal loan against your car. In other words, by placing your car with the lender as security or collateral. The lender would first estimate the depreciation in the value of your car for the term of the loan. And then account that value against the amount of loan you need.
The value for car title loans cannot exceed the value of your car. It would generally be less than your car’s value.
This is because the lender would also include the processing fee, interest, and other expenses, apart from your loan value. And that too on the depreciation of your car’s value.
Car title loans are generally suitable for people who don’t require to borrow a large sum of money.
401(k) Account Loans
The most uncommon of all the personal loans are borrowing from retirement accounts. Yes, you read that right. You can indeed borrow from your 401(k) account, although most financial experts advise against it.
The reason why 401(k) loans are generally not recommended is that if unpaid in due time they come with heavy penalties. And in addition to this by taking out from your retirement savings, you are indeed hampering your future finances.
However, taking out a 401(k) loan is beneficial in some circumstances, as well. For example, if you can easily repay your loan and that too with due interest, you would be increasing your savings.
To put this into perspective, the interest you pay is added to your account and no third-party is involved.
Invoice Secured Loans for Small Business Owners
For small business owners, there’s yet another convenient way to take out a personal loan. Using corporate invoices, small business owners can easily access their credit lines.
It works like this- an unpaid or due invoice is placed as collateral for taking out a small loan. The repayments for the debt are made by paying a fraction of the invoice that is cleared.
To keep it simple, the lenders usually deduct their installments from the invoice before handing it over to the borrower.
So, if you own a small business, this might be the best option out of all for you.
Whether you take out an installment loan online or visit a private lender personally, make sure that you consider your options before making up your mind. After all, taking out a personal loan is considered debt and it needs to be repaid. And it needs no mention that careful management of your debts is necessary for long-term financial wellbeing.
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