Have you thought about a raise lately? What would you say if somebody would put the equivalent of 3, 6 or even 12 monthly salaries at your disposal? Welcome to the world of personal loans!
What are the personal loans?
The personal loans are banking products generally, but this does not mean that they can’t be given by other financial institutions. You can use those as you want. You can pay for shopping, you can withdraw the money from the ATM, or you can keep the money for rainy days. If you are already familiar with credits such as mortgages, you will understand the personal loan easily, because it is simpler. The personal loan is the perfect compromise between a credit card and a warranted loan. It is a sum of money that is at your disposal for current expenses.
Even so, the personal loans have their problems. If you need money fast, you will get it fast through this loan. However, if you spend the money in an irresponsible manner, for expensive items that are not really useful, this mechanism will turn against you.
The history of personal loans
Before the financial recession, the banks offered this product fast, without too many analyses and questions. Today, the banks are not so thrilled to offer this product because of lack of warranties. Any employee comes with a risk, especially because the sums are hard to recover in case the client decides not to pay the money back.
If you also want a personal loan, you will need a set of documents. If you receive your salary through the bank that wants to approve you the loan, the procedures are even simpler, because the bank already has some details about you, and the fact that you receive the salary in an account at the respective bank represents some kind of warranty.
Your national ID is mandatory, of course. Besides this, the proof of income from your employer is also necessary. If you want a bigger sum, you will need somebody as a warrant. This person can be a family member or a friend. However, if you are not able to pay the rates anymore, the bank will force the warrant to do that, so the respective person needs to know that he or she takes a risk by warranting for you.
Be aware of traps!
The personal loan is perfect if you need to spend some money fast. If you decide to take this loan because you need a plasma TV or an expensive vacation, you might want to raise the money by yourself. It is easy to fall into the trap of bad loans if you are not careful, and this situation has to be avoided.
Be aware that the interest displayed by the bank on the shiny announcements and ads is not the real one. If you really want to anticipate all the costs and commissions that you need to pay for a loan, the best indicator is the APR (Annual Percentage Rate). This includes all the expenses, commissions and taxes, so it is the only real indicator that tells you exactly how much you need to pay for your loan.