Personal Loan Uses
Compared to traditional secured loans, you have the financial freedom to make use of your personal loan as you see fit. Whether it is to pay for a medical emergency or an unforeseen expense at home, you don’t have to answer to anyone on how you take charge of your money. Many borrowers are taking advantage of this flexibility. You can too!
Are your debts running out of hand? Take control. Pay off credit easier by consolidating debts. You can also save money on interest this way and promote wiser and more effective financial management.
Important Life Events
If money means experience – and one that means a lot to you – there is no reason why you wouldn’t dare and go to the extra mile to finance that important milestone. Assess your current financial situation and take the plunge if you are confident of a much greater outcome.
We can never tell when an unexpected family medical emergency would arise. Instead of worrying about the finances, be there for them instead. A subprime personal loan is a quick relief to your emergency medical needs.
Are you short of what you expected to earn and still need to fund that family holiday trip? Get the additional cash needed through a subprime personal loan. If you are confident of your financial stability, the risk would be worth its price.
Subprime Personal Loan FAQ’s
What are subprime personal loans?
A subprime personal loan is a kind of loan offered to borrowers with bad or less-than-perfect credit. This type of personal loan is offered at higher interest rates to compensate for the risk that lenders take in offering the loan to a risky borrower who is more likely to default on the loan than those will stellar credit.
Who can get a subprime personal loan?
Subprime personal loans are usually offered to borrowers with credit scores 629 and below.
How much can I borrow?
You can borrow as much as $1,000 to $40,000 or higher. The extent of the loan amount that can be availed differs from lender to lender.
What determines a bad credit?
Lenders tag a report as “bad credit” when they recognize the following negative entries:
- Defaults on other credit obligations or loans
- Financial judgments against the borrower such as foreclosures and bankruptcies
- Frequent credit inquiries
- Late payments
- Presence of collection accounts
- Unpaid debts and tax liens
The presence of these negative entries in a borrower’s credit report could mean that said borrower might be likely to default on the loan in the future and is therefore considered more risky.
Where can I get a subprime personal loan?
When looking for lenders, it is advised that you first consider your local credit union since they have less strict requirements and offer competitive rates even to subprime borrowers. Other entities that could provide subprime personal loans include banks, finance companies, private lenders, peer-to-peer lenders, as well as loan brokers.
These sources vary in rate offers so take your time to compare, not just rates but their requirements and flexibility criteria. When choosing a lender – and this is especially emphasized for subprime borrowers – get to know your lender, their charter, license, and track record within years of service.
Is there a restriction as to how I use my personal loan?
No. Personal loans are flexible that way. You can use your loan to fund a family vacation, finance an unexpected personal expense, consolidate debts, or whatever your need might be at any moment.
What factors determine a loan to be subprime?
During the underwriting process, lenders inspect your creditworthiness by looking into your financial profile. One of the following factors may determine if your loan offer would fall into the subprime category:
- Bad Credit Standing. If your credit score is not so stellar and is below the acceptable prime limit, there is a fair chance that your loan would fall into subprime.
- Insufficient Reserves. As a safety net and an additional reassurance, lenders would want to know if you have enough financial reserves to cover some months of the payment period. Failure to show this would often result into being offered a subprime alternative.
- Unstable Employment. If you don’t hold a stable job, how will you pay for the loan? You need to present evidence that you are standing in solid ground when it comes to your career. Subprime lenders, however, are more willing to accept gaps in employment history and even self-employed borrowers.
- Not Enough Income. If the amount you currently earn does not realistically match with the amount you are trying to borrow, you may have a hard time getting said loan. Subprime lenders are more willing to take the risk with borrowers who have high DTI or debt-to-income ratio.
What are the different types of personal loans?
There are two categories of personal loans:
- Installment Loans
Installment loans, as the name suggests, are personal loans that are paid at a fixed amount throughout a defined period of time. These fixed amounts are called installments and can be scheduled monthly, biweekly, or even weekly, depending on your terms.
In turn, there are two kinds of installment loans:
Secured loans are loans that require the borrower to pledge a collateral. This collateral is in the form of any asset of high value. If the borrower defaults on the loan, the lender takes the right to seize said asset as a repayment.
Unsecured loans are loans that do not require a collateral. These are sometimes also called signature loans.
- Personal Lines of Credit
Personal lines of credit are similar to credit cards. They allow a borrower to draw against their credit limit again and again as long as they still carry available credit. However, debt can compound in this structure since balances can be carried over to the next payment cycle. The payment varies according to the outstanding balance at the time of the borrower’s last statement.