Personal loans provide an affordable alternative to credit cards and help you finance life’s big purchases while saving on interest, especially on emergencies. People take loans for reasons ranging from debt consolidation , home improvement finance, purchases, trip funding to everyday expenses.
Before taking a personal loan, it is most important that you have a clear repayment plan, whatever the need for such loan is.
- 1 What is a Personal Loan?
- 2 How do I check my rate for a personal loan?
- 3 How much can I borrow with a personal loan?
- 4 Can I lower the interest rate on my personal loan?
- 5 How long does it take to get a personal loan?
- 6 What is an unsecured personal loan?
- 7 Are there any fees to apply for a personal loan?
- 8 Can you pay off a personal loan early?
- 9 What do I need to secure a personal loan?
- 10 Are there autopay discounts on personal loans?
- 11 How will my credit score affect my eligibility for a personal loan?
- 12 How does applying for a personal loan affect my credit score?
- 13 Will getting prequalified for a personal loan affect my credit score?
- 14 How do I get personal loan with a low rate?
- 15 Is a personal loan a variable or fixed-rate loan?
- 16 What is the difference between APR and interest rate?
- 17 Can I merge my personal loan with my home loan?
- 18 Do I qualify for a personal loan if I have other loans that are not paid off?
- 19 What Is A Personal Loan Origination Fee And How Much Is It?
- 20 How long does it take to pay back a personal loan?
- 21 What does my credit score need to be in order to qualify for a personal loan?
- 22 What is a credit report?
- 23 What is comprehensive credit reporting?
- 24 What is a bad credit rating/score?
- 25 Do I have a good enough credit score?
- 26 What is a secured bad credit personal loan?
- 27 Is it difficult to improve your credit score?
- 28 What documents are required for a Personal Loan?
- 29 What documentation is needed for a self-employed personal loan?
- 30 How do I find out my credit rating/score?
- 31 Will I qualify for a debt consolidation loan?
- 32 Am I eligible for a personal loan?
- 33 How is my Loan amount calculated?
- 34 How much will I pay in interest?
- 35 Why Is My Personal Loan Interest Rate Higher Than My Mortgage Or Auto Loan Interest Rate?
- 36 Does the personal loan have fees?
- 37 Why did my loan get rejected , even when I have a nice salary?
- 38 Is it possible to transfer a personal loan to someone else?
- 39 Summary
What is a Personal Loan?
Personal loan is an unsecured (backed by collateral such as a home, boat or car) loan tenured mostly between 1-5 years, given by banks, NBFC’s (Non Banking Finance Companies) or P2P lending platforms without asking for any collateral, guarantor or hypothecation of any assets.
These loans are typically available from a traditional bank, credit union or online lender, and like other installment loans, are paid back in equal monthly payments with a fixed interest rate.
The ultimate usage of a personal loan is left to the discretion of the borrower. But borrowers generally use a personal loan for debt consolidation, repaying high cost debt, meeting any family or medical emergency, wedding, vacations, home renovation, rental deposits, business needs for an SME, buying certain assets, etc. Unlike credit cards, which tend to have high interest rates, personal loans have a fixed repayment term, so they often come with lower interest rates, especially if you have a good credit score.
How do I check my rate for a personal loan?
Checking your rate for a personal loan through can be done through a Credit Bureau is fast and easy. Simply create an account with them using your email address, answer a series of questions about yourself and your loan request, authorize a credit check, and see what options may be available for you! Check our current personal loan rates.
How much can I borrow with a personal loan?
The first step in choosing a personal loan is knowing how much you need. The smallest personal loan sizes begin at somewhere around ₦100 to sums above ₦1,000 000. Any loan offers provided are based on the information on your application and will depend on a variety of factors, including terms of loan, financial history and other factors.
Can I lower the interest rate on my personal loan?
Refinancing your loans may transfer them to a different lender and could potentially give you a lower interest rate. However, there are other ways to lower the interests on your loan.
How long does it take to get a personal loan?
Once you have successfully completed the loan application process, the process to receive your funds typically takes 24-48 hours. However, for some lenders, the process may take up to two weeks.
What is an unsecured personal loan?
An unsecured personal loan is money you can borrow from a financial institution, such as your bank, credit union, or favorite online lending partner. Unlike a secured loan, an unsecured personal loan doesn’t require collateral – like your home or car. Like any personal loan, if you are approved, you will make monthly payments to pay it back in full (plus interest) over a set duration of time. The loan terms and interest rate vary based on the lending partner you choose, your personal credit history, and other factors.
Are there any fees to apply for a personal loan?
Applicable fees are dependent on the lending institution. Some lending partners charge origination fees and the amount of the origination fees, if any, vary by partner. Any applicable fees will be disclosed and will be part of the APR calculation.
Can you pay off a personal loan early?
You should always confirm your repayment terms with your lender. Some lenders will allow you to pay off a personal loan without any prepayment penalties. However, some installment loans may have fees associated with early payoff.
What do I need to secure a personal loan?
Asides from having a basic checking account and savings account, you may need to supply some pay stubs, a valid ID, and the reason why you want a personal loan. To enable the lender decide whether or not they can approve you for a loan.
Are there autopay discounts on personal loans?
Some lenders offer an autopay discount, which will lower your total monthly payment amount. Your rate offer will include details of any available autopay discount and authorization from you. You can easily sign up for autopay after your personal loan details are finalized. The funds will come out of your bank account automatically on the due date.
How will my credit score affect my eligibility for a personal loan?
To check the rates and terms you may qualify for, as well as determine your eligibility, Splash will conduct a soft credit pull. A soft credit inquiry will not affect your credit score.
However, if you choose a product and continue your application, a lender will request your full credit report from a consumer reporting agency, which is considered a hard credit pull and may affect your credit. This allows Splash and our lending partners to ensure that you’re receiving the best rate possible on your loan!
How does applying for a personal loan affect my credit score?
When you are trying to secure a personal loan, your credit score will have an impact on your interest rates. Some of the key things most lenders look at when considering you for a personal loan include:
- Your debt-to-income ratio
- Total amount of credit available vs total credit card debt
- Length of credit history
Will getting prequalified for a personal loan affect my credit score?
No, getting prequalified typically won’t impact your credit score. Much like looking for the right mortgage lender, you’ll want to compare offers from multiple personal loan lenders before locking in your choice.
How do I get personal loan with a low rate?
Specific lenders evaluates applicants differently and uses its own methods to determine rates, and the applicant is required to meet specific underwriting requirements based on the lender’s criteria.
However, not all applicants will receive the lowest rates advertised.
Your online application, loan terms, credit score and approval, and other factors considered by the lender determine whether you qualify for a loan as well as the interest rate presented to qualified borrowers.
Is a personal loan a variable or fixed-rate loan?
Depending on the personal loan lender, you may be able to choose between a fixed and a variable interest rate. But, there are a few distinct differences between the two, so it’s important to weigh up the pros and cons before deciding on what’s right for you.
A fixed interest rate loan gets you the convenience of knowing exactly how much you need to repay each fortnight or month. On the other hand, you generally won’t be able to make lump sum or advanced payments to close your personal loan early – or at least not without a penalty.
With a variable interest rate personal loan, you may be able to get a longer loan repayment term, with the option of paying off the loan early. You typically won’t need to pay any additional charges for an early full repayment either. The potential disadvantage with an interest rate that can change is that your repayment is not entirely predictable, as it can fluctuate with the market. However, you’ll likely have more options as more lenders offer a variable interest rate personal loan.
What is the difference between APR and interest rate?
The interest rate define the annual cost of a loan to a borrower and is expressed as a percentage. APR however, refers to the loan’s annual percentage rate and represents the total cost of credit as a yearly rate, including fees. For instance, a lender may charge an origination fee for processing your personal loan application, so APR would include both the origination fee and the interest rate.
Can I merge my personal loan with my home loan?
Yes. You can refinance your home loan and, in the process, merge or consolidate your personal loan and home loan. By doing so, you can lower the number of debts you have, and you may also reduce the total interest you have to pay.
However, you should consult a financial advisor or a mortgage broker to confirm that you are decreasing your total outstanding debt, including interest payments.
Do I qualify for a personal loan if I have other loans that are not paid off?
Your previous loan history may not automatically disqualify you from receiving a personal loan. Many people have student loans, auto loans or home loans in conjunction with a personal loan.
But, however, in the long-run, if you have a backlog of unpaid or a history of default, it is definitely going to affect your ability to access loans
What Is A Personal Loan Origination Fee And How Much Is It?
The origination fee covers the cost of processing a loan, and it is usually charged upfront. Like all other loans, the origination fee amount vary from lender to lender. Some lenders offer higher interest rates instead of origination fees and removed from your loan amount before the funds are distributed to you.
How long does it take to pay back a personal loan?
The amount of time you have to pay back a loan varies from lender to lender. Generally, they can offer a repayment period between 6 months and 7 years.
If your repayment period is longer, your monthly payment could be less expensive than if it were a shorter time period.
What does my credit score need to be in order to qualify for a personal loan?
Most of the time, lenders look for credit that ranges from average to excellent. Typically, this means that you should have a credit score of 620 or higher. However, if your credit score is lower than that, you still may be able to qualify for a personal loan with a higher interest rate.
What is a credit report?
A credit report is a record of your credit history, which covers your credit enquiries, borrowings and your repayments. The report will include information about any bankruptcies or other relevant legal judgements. It will also include biographical information such as your address, date of birth, driver’s license number and employment history.
What is comprehensive credit reporting?
Comprehensive credit reporting is a system which includes both positive and negative information on a person’s credit file. Before comprehensive credit reporting was introduced, only negative information was included.
What is a bad credit rating/score?
Credit ratings or credit scores are calculated by credit reporting bodies such as Credit Bureaus.
Do I have a good enough credit score?
Before you start applying for personal loans, it’s important to know your credit score to make sure you can qualify. Most personal loan lenders are looking for applicants to have a good credit score, particularly online banks. However, if you have an existing relationship with a bank, you may get approved for a favorable deal if you have a good history of paying bills on time and honoring the terms of your past loans and accounts.
Sometimes, credit unions will offer lower interest rates on personal loans and work with borrowers who have fair or average credit scores. But you often need to become a member and sometimes you need to open a savings account before you can qualify for a loan.
For people who don’t have a great credit history, Upstart accepts applicants who have insufficient credit history or don’t have a credit score at all. You will likely pay higher fees and interest rates than if you had a good credit score, so be sure to clearly read the terms and conditions before you sign on for the loan.
What is a secured bad credit personal loan?
A bad credit personal loan is ‘secured’ when the borrower offers up an asset, such as a car or jewelry, as collateral or security. If the borrower fails to repay the loan, the lender can then seize the asset to recoup its losses.
Is it difficult to improve your credit score?
Improving your credit score involves some steps, most of them are discussed in this article. However, as a general rule, the lower your credit score, the more remedies you can apply and the greater the scope for improvement.
What documents are required for a Personal Loan?
One need to provide an identity proof, residence proof, last 3 months salary slip, last 6 months bank statement and a passport sized photograph. Banks may also ask for additional documents later like Form 16, appointment letter, company ID card, previous company relieving letter.
What documentation is needed for a self-employed personal loan?
Personal loans may require a borrower to provide proof of identity, proof of residence, details of any other outstanding loans (including credit cards), details of assets they own (e.g. savings, car, property), and proof of income.
While borrowers in full-time or part-time employment can often provide pay slips and similar documents to prove their income, self-employed borrowers may need to provide other documents, such as bank statements or tax returns, to demonstrate that their income can cover a loan’s repayments.
How do I find out my credit rating/score?
You’re entitled to one free credit report per year from credit Bureaus. Credit reporting bodies have up to 10 days to provide reports. If you want to access your report sooner, you’ll probably have to pay.
Will I qualify for a debt consolidation loan?
Getting qualified for a debt consolidation loan depends on a number of criteria such as credit score, repayment history, FOIR etc. If you meet all the eligibility criteria, you will definitely get a debt consolidation loan.
Am I eligible for a personal loan?
Since there’s no collateral, qualifying for a personal loan is ultimately determined by your credit history, income, other debt obligations and monthly cash flow. While each lender varies, lenders typically look for a minimum acceptable credit score that falls within a range of 600 to 700+.
How is my Loan amount calculated?
Loan eligibility is dependent on primarily the following factors:
- The company where you work.
- Every bank has a list of companies running into thousands which they have categorised into segments like A, B, C etc. depending on the credentials and financials of your employer. The higher the category the higher is the loan eligibility chances.
- Quantum of loans and credit card outstanding that you already have. Typically a bank will not give a loan if the total EMI obligation (including the current personal loan that your are trying to apply for) exceeds 50-75% of your total net take home salary.
- Your gross/net salary
- Your credit score as reflected in your credit report. Having a good credit score is a necessary but not a sufficient criteria.
How much will I pay in interest?
Your interest rate depends on a number of factors, including your credit score, loan amount and your term (length of time you’ll be paying the loan back). Interest rates can be as low as 3.49% and as high as 29.99% or more. Typically, you’ll get the lowest interest rate when you have a good or excellent credit score and you choose the shortest repayment term possible.
Why Is My Personal Loan Interest Rate Higher Than My Mortgage Or Auto Loan Interest Rate?
A secured loan on a mortgage or car loan is backed by the actual asset – in this case, the home or car, respectively. Therefore, if you fail to make payments and default, you’re at risk of losing the asset. On the other hand, an unsecured personal loan has no collateral. Therefore, the lender assumes the risk on your promise to repay.
It’s for this reason that unsecured loans have higher interest rates: They create a higher risk for the lender. However, it’s important to assess the price of the loan versus borrowing from your home equity, for example. Sometimes the overall cost of a personal loan can be significantly lower than borrowing equity.
Does the personal loan have fees?
Personal loan lenders may charge a sign-up, or origination, fee, but most don’t charge any fees other than interest.
An origination fee is a one-time upfront charge that your lender subtracts from your loan to pay for administration and processing costs. It’s usually between 1% and 5%, but sometimes it’s charged as a flat-rate fee. For example, if you took out a loan for $10,000 and there was a 5% origination fee, you would only receive $9,500 and $500 would go back to your lender. It’s best to avoid origination fees if possible.
Why did my loan get rejected , even when I have a nice salary?
Most banks have certain internal credit parameters to evaluate a loan which is kept confidential and not shared with us. Several demographic, financial and credit aspects go into these internal evaluation. You might not have met the minimum cut off for obtaining a loan.
There are several other factors that may cause your loan application to be rejected.
Is it possible to transfer a personal loan to someone else?
If the borrower have co-signers with them for the personal loan then that co-signer is equally responsible for the repayments and everything regarding that very particular loan. But when it comes to transfer of personal loan to someone else it is not possible in any condition.
Having reviewed these personal loan FAQs, we believe you understand that there are several considerations to make before applying for a personal loan. Most important, however, is making sure you do not borrow more than you can pay back.
Once you determined the monthly payments you’re comfortable with making and you have all of your documents and qualifications in order, you will be ready to start the application. Good luck!