If you need quick financial assistance, personal loans can be of great help. It is easy, reliable, and has limited insurance. Even if you ‘want’ to get instant cash, opting for personal loans can be the quickest way. But it comes with a catch: there is a stubborn credit score check that is mandatory for the approval of personal loans.
This means that you need to have a “very good” at least 700 to 800 credit score. Ultimately, you will qualify for personal loans. On the other hand, if your credit score is poor – say, it is less than 500 – chances are that your application for personal loans will be rejected.
So, most borrowers can not make it through the personal loan application. Why? Simply because they do not have a reliable credit score. The actual issue is not your credit score, though. Instead, it is the unsecured nature of personal loans. Unlike other modes of loans, personal loans are considered unsecured because they are not backed by the government.
The company that offers personal loans is the sole institution behind it. This means that there are no government institutions involved in personal loans. That is why these companies can not merely trust everyone and lend money. Instead, they have a proper strategy that the borrower has to go through to attain personal loans. And if your credit score is in the negative, you are not likely to avail of personal loans.
So, before you go for personal loans, check your credit scores. If you have pending bills, pay them off. Likewise, contact your bank if you need additional guidance on enhancing your credit score.
The Pluses and Minuses of Personal Loans
Apart from the credit check requirements, personal loans have certain pros and cons. To begin with the pluses, you can use personal loans for any purpose that you want. This means that the usage of personal loans is not restrictive.
For instance, if you opt for an auto loan, you can only use this loan to buy a car. Similarly, if you go with a mortgage plan, you can use this borrowed money to buy a car. Thus, you are “not allowed” to use these loans for other purposes.
On the other hand, personal loans are flexible and diverse. You can use this borrowed for literally anything and everything. That is the big plus of personal loans.
On the flip side, personal loans have high interest rates. Compared to other loans, personal loans charge a higher rate of interest. Which is a no-no for most borrowers. But still, if you compare personal loans with credit card loans, you will see that you are paying less via personal loans – despite the latest interest by the Federal Reserve.
Overall, personal loans are more efficient and cheaper than other loans. But if you want to qualify for it, you will need to make your credit score stand up to the demand of companies that offer personal loans.