The main thing to know about personal loans is all that is required to be approved is a good credit score and an appropriate level of income. The loans are not secured, which means they do not require any collateral. A signature combined with a solid credit report should be enough.
Stellar credit helps the applicant acquire a loan at a decent — if not competitive — rate of interest. As credit ratings drop to good, fair, and beyond, interest rates increase. The number of willing lenders may decrease.
Now, personal loans are not deemed revolving debt like credit cards or lines of credit. Personal loans are fixed. The amount of money issued is fixed. The interest rate can be fixed as well. In other words, the borrower is issued a finite amount of money and cannot draw anymore on the loan. A $5,000 loan is — in essence — a one-time payment.
A fixed interest rate of 8% stays the same from the first day of the loan term to the last. A variable rate loan is possible. With this type of loan, the interest rate may increase.
The loan does need to be paid back within the defined term length. Failure to do so is going to cause negative marks on a credit score.
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