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All what you need to know about Personal Loans

Before applying for a personal loan, you have to understand its definition and terminologies in order to know if it’s the best loan type to opt for or not…

-      What is a Personal Loan?

A personal loan resembles an amount of money you borrow from the bank to cover expenses that are beyond your usual expenditures
(i.e. emergencies, travels, educational or medi
cal needs, etc.).

The bank evaluates the amount of the personal loan according to the applicant’s profession, net monthly income, and other supporting documents needed to proceed with the loan application.

-      How can you apply for a personal loan?

The process is pretty simple; all you need to do is apply to your personal loan via the bank’s numerous channels (online, over the phone, at the branch, etc.), provide the required documents, and await the bank’s approval!

The documents required vary depending on your finances and your dealings with the bank. However, the required documentations are usually your proof of income, employment, residence, and other documents aimed to prove to the bank that you will be able to pay back your loan.

On the bank’s side, the process to approve a loan involves several departments working together to give you the best terms for your financial status while looking out for the bank’s interest, and follow the guidelines to reduce the risks attached to lending.

It’s also worth mentioning that before approving your personal loan, the bank checks your financials, other loans, or credit cards, and based on all information it gathers, it decides the amount, tenor, and interest rate.

-      Personal Loan Information & Terminologies:

1-    Loan Amount: the exact amount of money you need to borrow from the bank.

2-   Decreasing Interest Rate: an interest rate applied over the loan balance throughout the loan period.

3-   Early Settlement Fees: when the loan balance is paid (whether fully or partially) before the loan period ends, the early settled fees is added to the loan balance.

4-   Secured Facilities: a personal loan that is applied for using your savings as a guarantee; the bank secures your savings when you don’t want to use/spend them.

 

Note: the loan is then a certain percentage of your savings (with a higher interest margin than rate).

5-   Tenor: the loan repayment period

6-   Interest Rate: the percentage the bank adds to the loan amount, which represents the bank’s profit.

7-   Fees: the amount the bank charges for the personal loan service itself.