What is a Personal Loan?
A personal loan is an amount of money borrowed from a bank or lender that can be used for either robust purchases, clear bills, or any other expensive and emergency occurrence. It can be used for just about anything.
Typically, these loans are repaid through fixed monthly payments within a year. However, it could sometimes take longer, depending on the circumstances that surround the repayment.
Generally, personal loans are unsecured, which means they do not require collateral. This makes it one of the most accessible sources of fund. Given this, these loans come with higher interest rates because they are approved based solely on your creditworthiness with no collateral.
Where Can I Get a Personal Loan?
Typically, there are two main sectors in which you can get personal loans. The first is the regulated sector – they include commercial banks, micro-finance banks, and fintech companies like Palmcredit and Renmoney Nigeria where you can get an instant online loan in Nigeria. These are all regulated by the Central bank of Nigeria. The other source is the non-regulated sector which includes cooperative societies, credit unions, thrift collectors etc. they are not regulated by the Central Bank of Nigeria, but are, however, governed by their regulations and guidelines as a society.
As stated in our previous article, personal loans are an easy way to secure finances on short term notice. See below five ways personal loans can save the day.
Five Ways Personal Loans Can Save the Day
Unplanned Emergencies: Personal loans help deal with the expenses that emergencies bring. For instance, if there is a medical emergency, you might not be financially capable of dealing with it (which is why health insurance is essential), but choosing to take a loan can save someone’s life.
Large Purchases: Personal loans enable you to make large purchases as soon as you need them instead of saving up for them. Although it comes with fees, it saves your time and money in that you do not have to resort to expensive short term alternatives. This could also work with the Buy Now Pay Later scheme where you can make the purchase and pay in instalments.
Consolidate Debt: If you owe a lot of debts, taking a personal loan is a smart decision. By using the loan to clear your debts, you would have consolidated all your debts and can start paying to one lender instead of many. Although it comes with interest, the interest is considerably lower than your debts.
Start a Small Business: If you’re looking to start a small business but do not have capital, taking a personal loan could be your way out. Depending on how well you manage your business, you should be able to repay the loan in a short period.
Home Renovations: A personal loan is an excellent option if you need to renovate your house on short notice. It is less expensive than other types of loans and allows you to pay in instalments.
There are many other reasons one can take out a personal loan. Regardless of what your reason for taking out the loans is, it must be repaid-with interest eventually. Compared to other forms of loans, personal loans are easy to apply for. We advise that you borrow an amount you can pay back. The things that will significantly impact your life.
Given this, it is essential to utilize this loan resource responsibly and not abuse its privileges. Repayment defaults affect your credit score negatively and questions your character and credibility. However, paying your loans in due time speaks volume. It improves your relationship with any other financial institutions locally or internationally.