How to Decide Between A Personal Loan and A Traditional Loan

All loans are not made for everybody. Nowadays the personal loan has become a loan that everyone is applying for. It must be bugging you that what is the difference between a tradition loan and a personal loan. There are few differences between this two. Let us take a look:

What is personal in a personal loan?

Conventionally a traditional loans requires you to set up a collateral in the form of your house or vehicle.This way the lender can process your assets if you delay in your payments,This is also known as secured loan and usually comes with a low rate of interest but can risk your livelihood if one becomes too late with payments .On the other hand a personal loan does not require a collateral and is known as an unsecured loan. It is interest based on the credit worthiness of you accounts. Banks and other agencies which offer you personal loans also make a list of many other aspects, for eg. Credit scores and income reports to determine how much the interest rate should be and how much you are allowed to borrow. The biggest benefit of a personal loan is that one can use it for any personal usage, whereas traditional loans have to state the specific purpose for taking the loan.

Benefits of a personal loan

Money to you quicker! Traditional loans require a lot of paper work which consume time and require you to sign in person. On the contrary, personal loans are very hassle free and boast of a very quick turnaround time. Services like, AvantCredit and Lightstream guarantee funds within few days and also accept e-signatures.Peer to Peer services are comparatively more time consuming but do not take more than 14 days.

Do not always borrow from the bank. People nowadays are tending to trust less in banks and are turning to other alternative options to deal with their financial solutions. Peer-to peer is a rather new personal loans. Rather than borrowing they are turning to other financial institutions like Lending Club and Prosper give a good supply of funds until the final loan has been sanctioned.

Disadvantages of a personal loan

High Interests: Not having high credits will end up with high interest rates. Someone having a low credit score will have to deal with a gamble. The benefit of a personal loan is that one will get a fixed rate of interest. Just be sure to pay your monthly installments on time.

Hidden charges: It is always wise to read the fine prints that describe all the extra hidden charges which are commonly called prepayment fee. Chalk out which fees are directly associated with your loan. But mostly top services only charge the usual late/ rejected payment fees.

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