Arizona Tribune - OneMain Financial: Why More Americans are Turning to Personal Loans

What is a Personal Loan?

First and foremost, it's important to understand what a personal loan is and how it works. Offered by banks, credit unions and online lenders, personal loans provide a borrower with an upfront lump sum of money. Then, the borrower pays back what they borrowed (the loan principal) plus interest and fees over an agreed-upon period of time, or loan term. The loan term may be anywhere from a few months to several years or even longer, depending on the amount of the loan and its conditions.

Benefits of a Personal Loan

There are a number of benefits a borrower can enjoy if they take out a personal loan, including:

Flexibility

A personal loan can be used for virtually any expense. Many borrowers use a personal loan to cover an emergency expense, like a car repair or medical bill. A personal loan allows access to the cash they need today without depleting emergency funds.

A personal loan may also come in handy for those who have a lot of high-interest credit card debt and wish to consolidate it. Debt consolidation allows a borrower to roll multiple debts into a single loan with one manageable monthly payment date, ideally at a lower interest rate. A personal loan used for debt consolidation can streamline the debt payoff process and possibly save money on interest, depending on the annual percentage rate (APR) and the term of the new loan.

Other common uses for personal loans include home improvement projects, paying for moving expenses, and making large purchases. A personal loan can also be used by a borrower to pay for a special event, like a wedding or to take a much-needed vacation.

Often No Collateral Required

There are two main types of personal loans: secured personal loans and unsecured personal loans. While a secured personal loan requires collateral - something valuable a borrower owns, like a car or savings account, to back the loan - unsecured personal loans do not.

Most personal loans are unsecured, meaning those borrowers won't risk losing their collateral if they default on their payments. When considering an applicant for an unsecured personal loan, lenders look at factors like credit, income and employment situation, rather than the value of the collateral.

Easy Application Process

In the past, prospective borrowers needed to go to a bank or other physical location to apply for a personal loan. Thanks to the internet, most lenders offer online personal loan applications on their websites. They make it easy for individuals to apply quickly, from the comfort of their own homes or wherever they have a secure (not public) internet connection. Many lenders offer online loan approval and closing processes, including direct deposit, so the borrower can receive their funds anywhere.

Predictable Payment Schedules

With a personal loan, the borrower can budget their monthly payments in advance. That's because a personal loan typically comes with a fixed interest rate and term, making it a lot easier for individuals to plan ahead and avoid unwanted financial surprises. Some lenders will allow them to repay their loans early and save on interest without any penalty.

Chance to Improve Credit

A responsibly managed personal loan is a great credit-building tool. When a borrower makes - or misses - a payment, the lender reports it to the major credit bureaus. By paying on time, every time, a borrower may see their credit score gradually go up. A better credit score can open the door to lower interest rates and more favorable loan terms down the road.

Bottom Line

Personal loans have become popular among many Americans. These products are flexible, easy to apply for and repay and when they're managed well, they can even help borrowers improve their credit score over time.

Sponsored Content

About OneMain Financial

View Website

OneMain Financial is the leader in offering nonprime customers responsible access to credit and is dedicated to improving the financial well-being of hardworking Americans.

CONTACT:

Sonakshi Murze
Manager
[email protected]

SOURCE: OneMain Financial

View the original press release on ACCESS Newswire

A.O.Scott--AT