A personal loan is typically an unsecured loan that offers you access to cash that can be used towards debt consolidation, home improvements, or typically whatever else you need money for. Personal loans are generally offered with fixed interest rates that are lower than other financing options, allowing for a straightforward repayment process.
There are some companies that provide best personal loans for 2019. For instance lightStream, Sofi, and CitizensBank, are best personal loans for excellent credit. Best personal loans for average credit are Marcus, FreedomPlus, and PayOff. While Best personal loans for bad credit are OneMain Financial, and Avant.
From business credit cards to loans to investors, there are a number of ways to get your hands on additional cash to grow your business. One of the most popular funding option is personal loans.
You’ll need to take into account that personal loans are meant for different purposes and have different qualification criteria. They also impact your credit differently. Here’s what you need to know in order to decide whether a personal loan is good for you.
What can a personal loan be used for?
Personal loan can typically be used for anything. While lenders may ask the reason for your application. In most cases, you don’t agree to spend your loan funds on anything specific when taking out a personal loan.
Some lenders do have restrictions on what their personal loans can be used for. So make sure to read the fine print before applying for a loan. Most personal loans can also be used to pay off existing debt. Some lenders will restrict you from using personal loans for college tuition and expenses.
Personal loan can help your credit, whether is the right way to go depends on how you use it. This loan can improve your credit score in more ways than one. Most personal loan companies report your balance and payment activity to all three credit bureaus (Experian, Equifax, and TransUnion), which can help you build good credit over time.
Personal loans can also be used to consolidate other high-interest debt, which helps you save money and quickly improve your credit score.
Can I use a personal loan for business?
You can usually use a personal loan to cover any business expenses. Keep in mind that you’re still personally liable for repaying that loan — not your business — and it might be more difficult to separate your finances this way.
It can feel next to impossible to get startup funding, especially when your business hasn’t opened its doors. But because personal loans are lent to individuals, the state of your business won’t be a concern.
Instead, your ability to repay and your creditworthiness are what lenders consider. You’ll still need to meet certain eligibility criteria, but you won’t have to provide a business plan or jump through the hoops associated with borrowing a business loan.
Costs to consider before getting a personal loans.
Monthly interest charge
This is the interest rate applied to outstanding balances and any unpaid personal loan charge. The interest is compounded monthly, and borrower continue to pay it until the loan balance is fully paid.
Lenders charge a fixed service fee to cover the cost of processing personal loan application, including credits, checks, and administrative cost. The processing fee is deducted from the loan amount.
The Bureau of Internal Revenue (BIR) requires a Documentary Stamp Tax (DST) of P1.50 per P200 over a loan amount over P250,000. like the processing fee, the DST is deducted from the loan proceeds.
Early Payment fee
Some lenders charge borrowers for paying off a loan before it maturity date. This is called an early payment fee which covers the interest that banks would’ve collected if you paid the your loan off until it matures.
Getting approved for personal loans
The approval process for personal loan typically requires that you have good credit and stable income. You’ll also have to show that you have a low enough debt-to-income ratio to take on the burden of the loan you’re applying for.
If you don’t have good credit, you’ll typically have to resort to secured loans, which require a form of collateral, or loans from non-traditional lenders such as payday lenders, which make up for the additional risk in loaning to people with poor credit by charging sky-high interest rates.
You’re less likely to be approved for large sums of money with a personal loan than a small business loan. Personal loans tend to come in loan amounts ranging from around $1,000 to $50,000. Loan terms on traditional personal loans usually range from two years to seven years.
Advantages of personal loans
Easier approval — You might have an easier time getting approved for a personal loan. Especially if you haven’t been in business for very long.
Faster funding — Personal loans tend to require far less paperwork and documentation, so the approval process is shorter and you get your funds more quickly.
No collateral — The best personal loans are unsecured. Meaning you don’t have to put up any collateral to withdraw a loan. On the other hand, many business loans do require you to put up assets in order to secure the loan, especially those with favorable interest rates