Requirements and Terms
Requirements for Applying for a Personal Loan
Be of legal age.
Have a bank account.
Budget for the product or service you wish to acquire with the loan.
A statement of assets.
You must demonstrate solvency through a guarantor or income that shows your ability to repay the loan.
Repayment Terms for Consumer Loans
The repayment periods for consumer loans vary considerably depending on the service and amount of the loan.
Generally, the repayment period ranges from 1 to 15 years. Many services also allow changes in the payment plan and often the loan can be paid in full without additional costs. This is important because sometimes you want to pay off the entire loan to cancel it. You should inquire with the selected loan service.
Costs of Consumer Loans
The costs of consumer loans are specific to each bank or financial institution and there can be significant differences between them. The final costs often vary even within the same loan company, as the final price is influenced by various factors such as the borrower's income, the loan amount, and the loan repayment period.
However, what you should keep in mind is:
Interest Rate: It is a percentage of the total loan amount. Obviously, if one entity offers you money at 10% and another at 5%, it is better to take the loan at 5%. However, you should consider the following costs.
Disbursement Cost: Companies will charge you a fee for disbursing the loan and completing all the paperwork. So, you'll notice that when you requested 100, upon loan approval, you receive less than that, however, your loan is for the full 100.
Administration Cost: In addition to the interest, you should consider that consumer loans come with an administration cost which is usually a fixed amount per month, or a percentage of the amount you requested (different from the interest rate).
These costs are charged to you so that when offering you the loan, the bank tells you they grant the loan at 10%, for example, although later, with administration costs, it results in an effective cost of 15% on the amount you requested.
In other words, if you are about to apply for a credit or personal loan, do not focus on the advertised interest rate, but the key percentage you are seeking to understand the actual cost of the money is the effective rate, or total financial cost, which reflects the real cost of the loan.
Travel loans are personal loans intended to finance vacations or trips. They are usually short to medium term with interest rates that can vary depending on the borrower's creditworthiness.
Characteristics and Types
Characteristics of Personal Loans
The loan amount is not too high compared to, for example, a mortgage for buying a house.
Bank guarantees, such as a property, are usually not necessary.
They are granted by commercial banking institutions.
The loan money is used to acquire goods like a phone, a car, or a computer.
The repayment period is typically short to medium term.
In terms of financial costs: The interest rate is usually high and includes opening and cancellation fees.
Types of Personal Loans
Personal loans can be divided according to their purpose, and each of them has its own characteristics and differences from the others.
Consumer Loan: An online consumer loan is an option worth considering if you need quick financing for purchases or plans of various sizes, generally one-time.
Fast Loans: As the name suggests, a fast loan refers to a loan for a quick or urgent need for money. Generally speaking, they are usually very low amount loans with quite a high interest rate.
Student Loan: Applying for a student loan is usually a slower process than obtaining an unsecured consumer loan. A student using a student loan probably needs money every month to pay for their expenses, in addition to the costs of the university itself. Moreover, the bank considers that the person taking the loan, once they finish their studies, will be able to access a good job and have a higher capacity to repay the loan. This is why student loans are a specific category. Generally speaking, these loans have a lower interest rate than other categories of personal loans.
Microloan: As the name suggests, a microloan refers to loans of around 100-1000 dollars, euros, or the equivalent in other currencies, which are repaid in a relatively short period. Although this amount is small, requesting the loan should be carefully considered because they are often tied to a high interest rate.
What Are They Used For
What Are Personal Loans Used For?
Personal Loans are services offered by banks to lend money without a specific purpose. For instance, to buy a house, the bank provides a specific service, mortgages. For, say, loans to buy a car, the bank likely offers a different type of loan.
So, questions arise: Why this differentiation? Why doesn’t the bank simply offer "loans" as if everything were the same? Well, in terms of the amount of money, the repayment period, and the risk of default, buying a house is not the same as buying the latest iPhone model. The bank understands that if it lends you money to buy a house, and at some point you face financial difficulties, the mortgage is probably the last thing you’ll stop paying. Therefore, with this reasoning, a mortgage is cheaper in terms of interest rate compared to a consumer loan (which would likely be the first thing you'd stop paying if you need to tighten your budget).
In other words, if you want to buy a new phone, update your wardrobe, change the car tires, buy a new TV and have the money to do it, a personal loan allows you to purchase all this without having to shell out the entire amount at once. Thus, personal loans are consumer credits granted to people without a specific purpose. Next, we delve into the technical characteristics.
Last Update
4.11.24
HOME > FAQ
WHAT ARE PERSONAL LOANS
A personal loan allows you to have money without the need to justify its use. These types of loans are granted for short and medium terms. In other words, if you need a relatively small amount of money (not a mortgage to buy a house) quickly, with few requirements, the solution is a personal loan. In this guide, we review the general aspects of this type of credit.