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Personal Loans Making a Comeback

by Redeeming Riches on January 28, 2012

Following several years of very strict lending, several lenders and banks across the country have begun to open up their wallets and make it simpler for consumers to get approved for unsecured personal loans. According to SmartMoney.com, TD bank has reported a 6% increase in the amount of personal loans issued in 2011 while SunTrust Bank reports a 25% increase!

In addition to introducing less rigid credit requirements that will enable individuals with poor credit and high debt amounts to achieve approval, banks are also trying to entice applicants with good-excellent credit by offering lower interest rates. For example, in March of 2011, US Bank introduced unsecured personal loans with interest rates beginning @ around 9%, lowered from the previous starting point of 13%. The amount of loans serviced since have more than tripled.

Proof of income is still a requirement for all applicants of good and bad credit looking for an instant payday loan. And those with higher credit scores/rating in conjunction with minimal debt amounts are still considered ideal candidates with approval being likely, accompanied with favorable rates and terms. If you are able to receive an approval, the interest rates you receive will heavily depend on your ability of being able to pay the loan back timely. Interest rates are fixed, but if you fall behind on payments, you are going to incur late fees…which can end up being pretty costly at $20-$50/pop. If you neglect to make your payments, your account will be handed over to a collection agency which can equate to being sued in court. You don’t want to go this route. Therefore, don’t apply for a personal loan if you do not think you will be able to satisfy payment obligations.

Loan amounts offered by the majority of lenders are still pretty generous. Wells Fargo comes in at top, enabling consumers with excellent credit to apply for personal loans for as much as $100,000. Capital One is currently offering maximum borrowing amounts of $25,000 and OneMain Financial (formerly CitiFinancial) $10,000. And then you have online only loan providers like Choice Personal Loans that service the entire country, offering good and bad credit loans for as much as $150,000.

It is very important to note that being able to obtain easy credit also has its downside. For instance, many consumer advocates contend that these types of loans invite consumers to spend money that they should be saving. Choice has reported that many of their clients utilize their loans for buying large-ticket merchandise like flat-screen televisions, stereos, etc.. These types of purchases are not satisfying life’s necessities and should be carefully evaluated before proceeding. It is also common for borrowers to use the funding they receive for paying off high-interest credit card debt.

Unsecured personal loans are an excellent financing option, if used properly. They not only help satisfy unexpected financial crisis, like paying for doctor bills or home repairs, but can help you save money by paying off balances on high-interest credit cards. In addition, eliminating credit card debt will also help improve your credit score and rating since the carry on an unsecured loan is not as much of an impact on your credit.

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