Personal Loans – If You Are Looking For A Loan
Personal loans can be used for many different purposes by consumers who need money for various projects around the home, debt consolidation and many other reasons. Probably the most common types of personal loans are for new car purchases and for home renovations. Consumers need money for all kinds of other reasons as well and often end up going to their bank for a personal loan.
Another major reason for personal loans is debt consolidation. Consumers with credit card debt that cannot be repaid by the end of the month face high interest rates on these balances, making a personal loan very attractive. The interest rate on a personal loan for someone with good to excellent credit can save a great deal of money by paying a lot lower interest rate on their debt. The trick for most people is to avoid adding more charges to their credit cards that they are unable to repay and then being faced with personal loan payments and credit card payments at the same time.
There are other ways to obtain money if you are looking for a loan. Some consumers will use loan and mortgage brokers to help them find the best interest rate for their loan. If they are looking for a loan and have poor or bad credit ratings, the banks will usually not lend these people money. This is where a broker can really step in and help consumers find personal loans at competitive rates.
How can a Broker Help with Personal Loans
Personal loan brokers specialize in placing people who need money together with people who have money to lend. Lenders can be banks, credit unions, or personal individuals who have a lot of money and prefer to lend their money to consumers instead of investing in the markets. They feel they can make more money this way vs. getting a return of 1 or 2% in the markets. Brokers make it their business to be always aware of what the best interest rate deals are and from which lender.
Brokers will help consumers find personal loans and they will also pre-qualify the borrower for the lender. The lender pays the broker a finder’s fee for this service and the lender usually makes more money in this situation unless the borrower defaults on the loan.
Brokers update their information every day concerning personal loan interest rates, fees and terms with these individual lenders as well as the financial institutions. Everyone wants to stay competitive and it is not uncommon for interest rates to change on a daily basis.
This is one of the major reasons that many consumers like to use a broker to find a personal loan. They know they will receive the most competitive offer that is available that day. They can then decide to go ahead with the loan or wait if they believe that interest rates will decline. It really depends on how quickly you need the money when you are looking for a loan. Checking in with a broker and letting him or her know what your time frame is, can really help to make sure that you obtain the best rate.
Using a Personal Loan as a Down Payment
Individual lenders will sometimes take more risk when they lend money to borrowers. They tend to charge higher rates in situations like this since there is a higher risk of default and losing their money. For example some people who do not have sufficient savings for a down payment on a home will look for a personal loan to help them meet the down payment requirement. Many mortgage companies want to see as high as 25% of the value of the home as a down payment. This can be a lot of money for many people especially first time home buyers. Obtaining a personal loan that can be added to what the consumer has saved can help to meet the down payment requirements.
A situation like this is considered high risk by the banks and they usually will not lend money to consumers in this situation. Lenders who specialize in higher risk personal loans will meet this need, but the interest rates will be higher as well. A consumer needs to be careful in a situation such as this. Payments for the mortgage and the personal loan can add up to a large amount which will make it difficult for the borrower to meet their monthly commitments. Also if interest rates go up and the mortgage or personal loan is renegotiated, the borrower could be looking at higher monthly payments as well.
Interest rates have been quite low for both loans and mortgages for quite some time. They are rumored to be increasing over the next couple of years and consumers may want to lock in a personal loan at this time or a mortgage. The interest rate can be locked in at various terms from 1 year to as high as 5 or 7 years depending on the personal loan product and your own needs. A longer term personal loan will incur more interest over the life of the loan, however the monthly payments will be much lower as well.
If you are looking for a personal loan, a broker can assist in finding a personal loan with the lowest interest rate, fees and terms.
Personal Loans as Lines of Credit
A special type of personal loan is a line of credit that can be drawn on as needed and repaid as money becomes available as well. There is an upper limit to the amount that can be borrowed and most lenders expect that the interest accrued for the month will be paid each month. This amount becomes the minimum payment for the line of credit personal loan.
A line of credit is permanent. In other words you do not have to visit the lender each time you want to draw on the line of credit. It works much like a credit card with much lower interest rates for any balance on line of credit. In fact if you arrange a secured line of credit the interest rate will be as low as some of the best mortgage products.
Consumers interested in this type of personal loan can also look to a broker to assist them with arranging for a line of credit, whether it is secured or unsecured. Many consumers find this product very flexible and meets their needs for many different situations that they find themselves in.