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How to Make Full Use of Personal Loans

February 17, 2012 | Comments: 0 | Views: 120

Most people, at some point of their lives, turn to personal loans to pay for tax bills, car repairs, education tuition fees, housing, and a variety of other expenses. But what exactly are personal loans? Personal loans are actually unsecured loans, with fixed payments as well as a fixed payment schedule. Unsecured loans mean that the borrowers of the loans need not use their assets such as their cars or homes as a guarantee to obtain the loan. This way, people with limited assets can take up loans with ease. However, since personal loans are without collateral, the interest rates charged will be higher as compared to secured loans. Such loans are usually offered by banks or other lenders to clients holding good credit ratings.

There are two distinct types of personal loans, namely closed-end loans and personal lines of credit. Closed-end loans, usually used for one-time payments, are with a set amount and a fixed rate and repayment plan. Personal lines of credit, on the other hand, offer greater flexibility, as they have a revolving balance and a set limit. The only thing is that people who take personal lines of credit need to manage them conscientiously. Or else, the debt can turn out to be problematic.

Here are the most common ways personal loans are used -

Debt consolidation: Many people, who have hard-to-manage multiple outstanding accounts, make use of personal loans for the management of consolidating debt. A single loan is used to pay off their debt, and their debt is consolidated into a single monthly payment. This method makes debt repayment more simple and is able to increase a person' credit rating at the same time. You will be able to get out of credit card debt sooner.

Purchase of a vehicle: Personal loans can be taken when you need to purchase a car and your bank does not offer you an auto loan on your current car. This is a common situation as older cars have lower resale value; hence the collateral does not carry much worth.

Medical expenses: If unfortunately, you or any of your family members get hospitalized or need to receive emergency medical aid due to a serious injury or a certain disease, you will need to fork out a huge amount of money in a very short time. Most people will not be able to come up with such a lump sum, as insurance claims can only be done much later. This is when personal loans would be very useful.

Behind on bills and swimming in debt? I have received countless questions over the years from people wanting to know how to get out of debt. I created a list of easy ways to make money which people use a foundation to pay down debt. To find out more, please visit: =>

Source: EzineArticles
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