NEW YORK, March 05, 2022 (GLOBE NEWSWIRE) — Personal loans allow borrowers to withdraw cash for a variety of purposes, such as replenishing their emergency fund, refinancing high-interest debt or even making a purchase important. These loans are flexible, offer quick funds, are available online, and do not necessarily require borrowers to post collateral.

But before getting a personal loan, borrowers need to understand some basic details about them so they can have a good repayment plan in place and avoid making financial mistakes. Here are four important things borrowers should know about personal loans before deciding to get one.

1. They’re available in-store and online

Personal loans are available in person at branches of banks and lenders, but they are also available online through banks, lenders, and P2P marketplaces. This means borrowers have the ability to apply and obtain financing online from the comfort of their own home.

People who prefer personalized help and working face-to-face with a lender should apply in person. On the other hand, borrowers who want a quick and convenient experience should find an online lender.

2. There are several types

There are several types of personal loans, including:

Installment loans

Installment loans allow a borrower to withdraw a lump sum of cash at a specified interest rate and repay it in monthly installments of principal and interest. These payments are fixed, which facilitates their budgeting. Borrowers often use installment loans for refinancing or major purchases.

Cash advances

Cash advances give borrowers a few hundred dollars to cover expenses before they receive their next paycheck. These loans tend to last two to four weeks, and many lenders offering them have more lenient credit score requirements.

Borrowers will repay the entire cash advance plus interest when the loan matures. They can sometimes roll over the loan for another two to four weeks by paying an additional fee. Borrowers with poor credit who need cash quickly often rely on cash advances.

Lines of credit

Lines of credit allow borrowers to borrow as much money as they need up to their credit limit and then pay it back all at once or over time as they see fit. With these loans, only the funds withdrawn accrue interest.

Many borrowers use lines of credit as emergency funds or to finance a project or expense that has unpredictable costs, such as home renovations.

3. They can affect credit rating

Personal loans can positively and negatively affect a borrower’s credit rating. When the borrower makes an application, the lender can carry out a thorough investigation to check his credit. This slightly damages the borrower’s credit score, but fades and falls off their credit report after two years.

Personal loans can also have a positive impact on borrowers’ credit scores. A borrower can use a personal loan to boost their score by making regular monthly payments on time.

The bottom line

Personal loans are widely available these days. From cash advances to installment loans and lines of credit, there are several types available both online and in physical stores. Plus, they can be great financial tools, allowing borrowers to boost their credit score and accelerate their progress toward their financial goals. That said, borrowers should shop around and research lenders and loan types before making a decision. This will help them get a loan that fits their budget and needs.

Notice: The information provided in this article is provided for guidance only. Consult your financial advisor about your financial situation.

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