How Do Personal Loans Work?
How Do Personal Loans Work?
If you are strapped for cash, you may be considering a loan. When money is tight, borrowing can sometimes be the only option to stay on top of expenses and bills. The process of securing a personal loan, however, can feel daunting, especially in an already stressful time. Though it does help if the lender's location is close by
While your mind may initially jump to a bank loan, these days there are fortunately many easier and more accessible options available to secure extra funds, fast.
Whether you need money for an emergency home repair, car breakdown, or unplanned family trip, a popular type of personal loan is a payday loan. This essentially acts as an advance on your next paycheck, giving you access to up to $1500 within minutes. Faster and easier than applying for a traditional bank loan, modern lenders are making the process of securing a payday loan online more convenient than ever more.
If a payday loan sounds like the right personal loan option for you, here is how the process works:
Find a Personal Loan lender
The first step in securing a personal loan is to find the right lender for you. While this could include a bank, there are many more options available both in person and online.
In Canada, lenders need to be licensed, so make sure that this information is freely available. Other things to consider when choosing a lender include a history of positive reviews, a clearly written website, and communicative customer service.
Whether you choose an in-person or online lender is up to you, but for the most part the process is exactly the same. The only difference is that an online lender is generally easier and faster as you can apply 24/7, don’t have to queue in-store, and can easily shop around from the comfort of your own home.
Applying For A Personal Loan
Once you have chosen your preferred lender, you will then fill out the application. You can do this either in person, or online from your phone or laptop.
The application will ask for personal information and employer information to assess your financial situation. The general rule is that the more information you provide, the higher your chances of being approved for a personal loan. Lenders are looking to get a greater understanding of you as a person, so now is the time to communicate who you are.
What You Need To Qualify
Many people with low or no credit assume that a personal loan isn’t available to them, which frankly isn’t true. Modern lenders realise that there is so much more to you than just your credit score, so this is only a small factor in the approval process.
Even if you are worried about your credit score, it is worth applying for a personal loan. With other factors being considered such as salary, employer, and government funds, there is still a high chance that you could be approved for up to $1500 within minutes.
The Approval Process
Once approved, you will be given or electronically sent your personal loan contract. If online, this will usually be incredibly fast. Take the time to read the contract through to get familiar with the loan terms.
At this point there is still no obligation to follow through with the personal loan, which should leave you feeling empowered to take control of your financial situation. If it all looks good, sign the contract. If online, you can e-sign with a few easy clicks, alerting the lender to send your money ASAP.
Getting Your Funds
Your contract will outline the amount to be borrowed and method of payment. If you have opted for an online loan, an automatic email transfer will be sent, giving you access to your cash within minutes.
This type of loan is unsecured and unrestricted, meaning that you don’t need to put down any collateral and can use the money in whichever way you want. Enjoy the freedom to catch up on payments or emergency expenses, and breathe a sigh of relief that you are in control of your finances.
Paying It Back
Repayments will usually be automatically deducted from your chosen account, as outlined in your contract. This will usually be in tandem with your next paycheck, meaning you won’t be caught unawares. This is also when the borrowing fees will be taken out, the details of which can be found on your chosen lender’s website.
If you make the repayments on time, you can avoid penalty charges or high interest. If there are ever any issues with repayment, make sure to contact your lender ASAP. As mentioned, modern lenders understand that money can be tight, and are often willing to extend the terms or set up a reloan to prevent you being penalised.