Personal loans are types of loans granted by brokerage companies. Unlike mortgages or other types of financing, personal loans do not require a specific motivation, in the sense that their request by the client is not bound to the purchase of a particular asset but may be granted to purchase or repair a car, a motorcycle, help you pay for a holiday, to support medical expenses or simply to have more liquidity.
But how do personal loans and amortization plans work? And furthermore, is it possible to request a personal loan without a paycheck or collateral?
Personal loans are types of financing that fall into the category of “consumer loans”, which by their nature, can be requested without a specific reasoning, in the sense that being personal they are just requested to buy a car, a bicycle, the furniture or appliances for the house, a trip or to cover the bank account or post office. Therefore, the personal loan is not connected to a good or service, it is called a non-finalized loan whose disbursement, unlike the finalized loans, takes place by bank transfer directly to the client’s current account who submitted the request and not to the store or company in which the purchase of the good or service took place.
Personal loans is form of financing reserved for employees also with fixed-term contracts, self-employed workers and pensioners between 18 and 80 years to be completed when the loan expires. A current bank account is required.
The personal loan, as we have said, is a loan not aimed at the purchase of a particular good or service but it can also be requested for a need for liquidity. For the purpose of granting the loan, there are no particular standard requirements that the applicant must possess at the time of the request, as each financial institution prescribes its own requirements ranging from the maximum and minimum age to apply for a personal loan that can go from 18 to 70 years of age, income documentable with tax last 3 paychecks, good credit score, that is, not to present protests or bankruptcies, but also in this case there are institutions that still grant the loan.
How does the personal loan work? The customer who needs to request a sum of money can apply to various financial institutions or lenders to prepare a personal loan estimate based on the desired amount, or, can do it on the internet by filling out a format with all personal and income data.
On the basis of the data provided, the institute or other online lending company, carries out the necessary checks on the applicant in order to assess its ability to repay the loan installments and the risk in granting the loan, in other words it assesses the feasibility of the loan.
If then following these checks, the lender gives a positive result, the customer provides all the necessary documentation, the contract is stipulated and the repayment schedule for the repayment of the installments and on the next day, the requested sum is paid.
Schematically, the entire process can be described as follows:
1. The applicant provides the documents required by lender (ID, pay slips, employment verification);
2. The borrower fills out the application form, specifying their personal information, address and phone number, as well as the bank details;
3. The lender processes the application within an hour; in case of positive decision, the money is transferred into borrower’s bank account (or given in form of cash at the company’s office) by the next day.
A personal loan contract, whether it is stipulated with a bank or a financial company, must contain some fundamental data such as the interest rate expressed as a percentage of APR, the amount of the loan, the repayment plan, then the number of installments, their amount and the deadline for details of any further ancillary costs such as the costs of opening practice, those for the red or the bulletin etc.
The interest rate APR and Whole Real Annual Rate, are two types of rates that apply to personal loans, specifically the Whole Real Annual Rate is that which applies to the sum financed which is then added to the amount of the installment, and serves to calculate the final amount of each installment and the Effective Annual Interest Rate which also includes ancillary costs such as the practical opening, insurance, collection fees that are always charged to the customer. Furthermore, it is good to remember that the interest rates of personal loans are always fixed from the beginning to the end of the loan.
The cost of payday loans differs from one state to another. In some cases, the high cost is amortized by the legislature applicable within the administrative unit. In 18 states and the District of Columbia, the high costs are capped by the state, fixing the annual interest rate between 24% and 48%.
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