There are times when you don’t have enough money for something you love. Or to go somewhere. Or study. That’s when you consider personal loan ideas that help you fulfill what you want. But is this a good idea?
Today we want to talk to you about what is a personal loan, the features that define it, the conditions for applying for it, and some advice before that.
What is a personal loan?
A personal loan refers to a contract we sign with a financial institution (a bank) that we promise that, in exchange for giving us a sum of money X, we will repay it from month to month through payments, while taking care of the interest and expenses earned.
In other words, it is a way of borrowing money from a bank, or someone, intended for ourselves, i.e. money is used for something related to that person (buying a car, vacation, etc.).
Features of personal loans
Among the common features of personal loans you find, as the first, the fact that they are used for consumer goods and services. That is, your goal is to keep spending on something you want to do, whether it’s buying something, going on a trip, studying, etc.
Now, another feature has to do with the amount, as personal loans are usually not very high. In fact, banks have a limit of money they can “lend” through a personal loan. In addition, the person, by requesting this service, must respond with all of your assets, present, and future, as well as be committed to fulfilling the obligations he or she has. These are: return the amount lent to you and pay the interest and commission stipulated in the contract.
Personal loans are also those that have higher interest rates or are more expensive in general because, since there are no assets that “guarantee” the money lent, one of the ways a bank should ensure its collection is by asking for larger payments. However, they are faster to process.
How can I get a personal loan?
If, after reading all the above, you have decided to apply for a personal loan, you should know what are the most general conditions that the bank will ask of you. Believe it or not, if you use all the documents possible, you can speed up the process, and even then they have to learn it and it is possible that does not give an answer until 24-48 hours later, or even a few days later, always better than waiting to collect data.
These are the following:
- Legal age (you will not be able to apply for a personal loan if you are not over 18 years old).
- Have an unexpired DNI or Passport.
- Have a bank account, corresponding to the same bank where you applied for a personal loan.
- Demonstrates economic comfort. This is achieved through a bank receipt that serves to confirm that you have regular income and therefore, you will be able to return the money they will lend you.
In other situations, they may also ask for a photo to prove your identity.
Personal loan or credit
Personal loans and personal credit are two concepts that many consider the same, but are certainly not like that.
When you apply for a personal loan, the lender, i.e. the person who has the money and gives it to you, may not give you the whole money at once, but do it when you need it. Therefore, the interest you pay is not for the entire amount of money you ask for in credit, but only what you use.
For example, imagine that you are asking for a personal loan of 6000 euros. However, of that amount, you only spend 3000 euros. The interest you will get from the credit is based on 3000 euros, which you have already spent, not on the 6000 you asked for.
On the other hand, in the case of a personal loan, the amount is not only given to you at once but, even if you don’t spend it all, the interest you will return is calculated as a whole.
Things you should remember before applying for a loan
Before finishing, we would like to talk to you about the decision to apply for a personal loan or not. It is common that this idea is weighed long before a decision is made, but at other times there are ways to get the money without implying a contract with the bank, in addition to the payment of commissions and interest.
And, among the advice we can give you are:
Consider the idea of a personal loan
Depending on the amount, you should evaluate whether it’s easier for you to do it or better think of other financing methods, as well as whether that’s the best you can do.
Sometimes the desire to own something, or do something you can’t but that you can reach for a lot, but the consequences are not taken into account after that. So, as much as possible, you should appreciate the idea.
In this case, Are you able to repay the loan from month to month according to the payment? If you incur expenses, paying off new monthly expenses can sink you more, and failing to pay the loan will result in more interest being charged or you have to pay off the delay, which may be more expensive.
Think of other options
At times, asking a friend or family member can help to avoid having to pay commissions or process costs or benefits, but this should also be clear that it is necessary to return it and the conditions for returning it can be personally agreed with the person.
Rearrange your accounting
Sometimes with an accounting restructuring, or even debt consolidation, you can solve the problem you were thinking of asking for a personal loan. That way, the expenses will remain the same but you will have more liquidity to be able to face what you want.
This means reviewing the income and expenses you have and, in a matter of seconds, assessing whether they are really needed or in fact they consider something unnecessary that you can get rid of.
