Facts About Personal Loans That Home Owners Should Know
Understand how personal loans help home owners meet their needs, and the special precautions one must take when getting a loan.
A personal loan is a reliable financial resource during emergencies
Why people are interested in taking a personal loan?
In these trying times, a person may face situations that require quick access to cash. People usually consider using their line of credit, credit cards or taking up personal loans from their banks. But, for credit card holders–your needs may exceed your credit limit.
Mainstream lenders are stricter than ever when evaluating a person’s loan application. Plus, you need to present proof of stable income for at least a year, such as pay slips and tax returns, and you must have a good credit rating. But, there are specialized lenders offering personal loans to borrowers with bad credit. There are also minimum documentary requirements, so even those with no adequate proof of income may avail of their loan products.
You need to choose carefully between secured and unsecured personal loans
If you secure your debts against your home, you have to face the risk of losing your home if you fall behind with your payments. It is because lenders would foreclose your home and sell it to recoup the amount you borrowed.
Is it advisable to secure your personal loan with your home?
If you have multiple debts and you want to combine all the payment into a single one, it is advisable to get a debt consolidation personal loan which is secured by your home. This is because of the following benefits:
- You can repay all your loans by taking out a secured personal loan.
- It can boost your personal credit history, when you pay-off debts, and make up your mind that you are not going to touch your credit cards nor get another loan until you fully paid your debt consolidation loan, your credit score will improve.
- You will have enough money to pay for other urgent and important expenses. It will also provide you with enough money to budget each month—debt consolidation can help you reduce monthly loan payments. This way, you will have sufficient money to budget each month to pay for your household expenses and other essential needs.
- Save money on interest and fees. Personal loan can help you save money if you use it to consolidate your loan. You may be overwhelmed by your current financial condition because you are continuously accruing interests while you delay your payments. Even low interest credit cards and lines of credit may cost you a lot of money when you have been in debt for a longer time period. Or, you can simply use a portion of your loan to pay off a high interest credit card and restrain yourself from reusing the card until you have fully paid your debt.
Personal loan is an excellent option for people with bad credit history
If lenders refuse your application because of your poor credit rating, don’t give up. There are many lenders offering, fast and hassle free personal loan products that provides almost instant loan approval. You can send applications even on weekends, regardless of the time—and they will be happy to offer you affordable repayment terms despite bad credit.
Bear in mind that many lenders take advantage of people’s needs during a dire emergency. So, be careful when giving your personal details such as your name, tax information number, address, employment and income details and other information that other people may steal from you. Also, it is important to verify the lenders’ identify before you sign your future paycheck away.
Certain lending companies may offer loans at higher interest rates. Be sure to calculate the total cost of the loan. Don’t rely on estimates monthly cost. Some lenders may offer you lower monthly payment but longer long terms.
How to protect your home when you took secured personal loans
If you are employed with a fixed source of income, it is important to create a budget for each month to ensure that you have enough money to make payments, even in times of financial emergency. It is also advisable to use a portion of your borrowed money to fill up your emergency fund to meet instant needs, at times when you barely make enough money for your daily needs. Doing so will keep you from missing your monthly payments and obtaining another loan to meet fund shortage.
Make sure that you set aside three months’ worth of repayment to ensure that you won’t have to borrow money. It will also keep you from resorting to drastic measures such as acquiring high interest loans, maxing out your credit cards or line of credit and selling some of your assets just to save your home from foreclosure.