A personal loan is a type of loan that can be acquired by people who have a regular source of income and have attained the age of 18 years in many countries to buy a car, house and finance their vacations. In many cases, personal loans are usually dependent on an individual’s income. Most of the financial institutions offer personal loans of about four times of an individual net pay if the loan is to be serviced using one’s income from employment. In addition, this type of loan is usually broken out and is usually repaid in installments from around six months to around 60 months.
This loan has a number of merits compared to other types of loans. First, there is no collateral required. Banks and other financial institutions require the borrower to meet their set benchmark to release the amount borrowed. Secondly, the banks do not regulate how a person will use the amount secured as a loan. The individual is in full control of the said amount. This means that the borrower is in full control of his or her personal finance. In addition, this loan is usually processed faster, and therefore a lot of time is saved to do other things. Once an individual has fulfilled their requirements, it takes about 24 hours to have the money in the account. Moreover, such loans can be used to offset other debts owned somewhere else. Since they are processed quickly, a person can take a certain amount of money and settle his or her debts while not being rushed to repay the loan because it is usually repayment time is distributed over a period of time.
On the other hand, personal loan have a number of disadvantages. Since this is an unsecured loan, it is usually charged a higher interest rate because it is a risk to the banks and other financial institutions. Secondly, the borrower must have a bank account with the financial institution he or she want to secure a loan from. Other banks will require the borrower to have opened an account with them at least six months prior to borrowing a loan from them. In this case, a personal loan may not help some of the pressing issues one might have urgently. Banks will also ask for guarantors when securing a personal loan from them. In other instances, employees will be asked to bring a letter of introduction from their employer a situation that is time consuming. Some banks will also deny personal loans to people earning less than their set standard.