Back in the days where banks were the only lenders in the business,
getting a loan meant putting on your best clothes to go to a nervy appointment
with the bank manager. You'd sit there for some minutes, feeling like you're
facing the school headmaster and bracing yourself for humiliation. It is then
such a relief that these days, things aren't so bad.
Banks used to have the market for personal loans all to themselves. This
is because they were the only business entities that could offer personal
loans. And because of this, they charge you extortionate rates, confident in
the knowledge that the borrower has no other choice. Well, it's a little
different now. The market is open, which means that banks are no longer the
only ones from whom you can get your personal loan. There are loads of places
where you can apply for personal loans. And because of the increase in supply
of consumer credit, the rates have become increasingly competitive.
You can find loan providers everywhere. Supermarkets, gas suppliers,
junk mail, television, and magazines are only a few of the places where you can
look for personal loans. This means that a wide array of options is held open
for you, assuring you only the best of deals. However, with so many places to
choose from, where do you start?
Personal Loans - The Beginning
Let's start at the beginning. What is a personal loan? A personal loan
is money lent to an individual by a financial institution for a specific
personal purpose. The circumstance does not include buying a house since that
is covered in wholly different loan category. One main difference between a
personal loan and a home loan is that most personal loans are unsecured. So,
that means that there is no collateral provided and the only guarantee that a
borrower can give the lender is his reputation for good credit. This is also
one of the main reasons why personal loans have interest rates that are a
percentage higher than most other loans.
The Factors to Consider
To work out the answer for this, you will need to find out how much you
can afford on monthly repayments. Do your calculation by looking at your
monthly household income. Afterwards, find out what your monthly expenses are.
These include your maintenance payments, food, outstanding debts, any bills,
clothes, and any other miscellaneous spending money. Add all these figures and
work out a safety margin of 10% just to be on the safe side. You will then take
all your expenses and subtract them from your monthly income. What you have
left is your available cash for your personal loan.
When you're taking out a loan, it doesn't really matter what your reason
is. The main question is whether or not you can afford to make the monthly
Tony Forster has a keen interest in living debt free having been "up to his ears" before realizing the need to take control. He has compiled an online financial article resource at