A money that is borrowed from a Bank, Credit union, or a money lender that you pay back in fixed monthly payments, normally over two to five years, is called a Personal loan.
Some personal loans are “unsecured” — not backed by collateral. Secured loans are backed by a car or house and this is sure cheaper, but the issue is that you can lose the asset if you fail to meet the requirement or obligation.
Personal Loan is not like mortgage loan that is typically for buying of houses, or college loan that is for education or academic alone. In the case of personal Loan, you usually can use the money for any reason.
Moreover, unless you can qualify for a promotional balance-transfer credit card offer, rates on personal loans are typically cheaper than those on a credit card, and the limits on how much you can borrow are usually higher. If you have high balances on multiple high-interest credit cards, a personal loan can
consolidate debts into one payment at a lower rate.
Those who loan out money (lenders), make their decisions based on factors including credit score, credit report and debt-to-income ratio . Not surprisingly, consumers with excellent credit receive the lowest rates, but some lenders offer loans to customers with scores 600 or lower.
The wise thing to do is to compare rates from multiple lenders before choosing. The loan with the lowest Annual Percentage Rate (APR) is the least expensive — and therefore, usually the best choice.