Taking loans for personal reasons is now gaining popularity in the U.S. although it has been a well accepted financial product in Germany for many years. In the U.S. the use of plastic credits is now slowly being replaced by personal loans. As compared to the other loan products like home loan, education loan that are already widely popular , loans taken for personal reasons are much more flexible which is one of the reasons for its popularity. The terms of such loans and the interest rates are much more favorable and the processing is far speedier than all other loans that you know. Money is made available to you within a day and does not make you feel like having taken a loan that usually takes much longer time.
1. Features of loan for personal use
The most distinguishing feature of personal loan is that it requires no explanation of the purpose of taking the loan as is mandatory for other loan products. While other loans are meant for specific purposes like making home, education or buying a car, for personal loans you need not give any reason at all. The word personal simply covers any need that you might have for which immediate finance is required. It is more like making a wish for getting money and it is made available to you almost at the drop of a hat.
Personal loans have short tenures that can vary between one and seven years. The interest rate depends on the personal and financial profile of the borrower. It is worked out based upon the income of the person and his / her credit score as important factors. The amount of loan, its tenure and the personal profile are considered in totality to decide the interest rate.
Demand is growing
Personal loans are available from credit unions and banks besides many financial companies that have included the product in its port folio. Millennials in the age group of 18 to 29 years find this option of ready finance a better way to meet their personal needs as compared credit cards. Almost 10 percent Americans are inclined to personal loans and the millennials constitute 18 percent of the borrowers.
As compared to the earlier years in 2014 and 2015, the trend is set for further increase in 2016. The growth recorded between 2014 and 2015 was 7.1 percent and in 2016 a rise of another 5 percent had been projected by the credit reporting bureaus.
Outscoring credit cards
There is one very favorable point for personal loans that makes it more attractive than credit cards. As compared to the double digit interest charged on credit cards, personal loans are available at much lower interest. All that you need is a little planning and a bit of time to avail the loan.
Since personal loans are now available online and the loan is credited directly to the borrowers account within 24 hours of submitting application, it has become a hot favorite for many. The processing is completely hassle-free with minimum need for documents.
About the author – Dave Moore is finance professional with special interest in personal finance. He keeps writing regularly on varied topics about finance and shares the latest trends in the industry. Although not a new product, personal loan is now attracting the Americans. Dave loves to share information about the developments in finance industry through his writings that can help individuals in better planning.