The spoken and unspoken rules of lending

A Quick Guide to

Personal Loans

For what Reason?

• Most common reasons for a loan:– House– Car– Boat– Health bills– Debt payoff

• For small loans, bank may not even ask

What Kinds of Loans?

• Peer-to-peer loans– Friends or family

• Home equity– With or without line of

credit

• Short term• Fast cash advance• No-credit loans

Secured vs. Unsecured

• Secured personal loan– Require collateral

assets – For those with

lower credit score– Lower interest

rate– Less risk to bank

• Unsecured personal loan

– Do not require any promise of collateral

– Lender usually needs a very good credit score

– Higher interest rate– Less risk to borrower

Frequency of Loans

• Rate of personal loans being approved is increasing

• Recent reasons– Economic instabilities – Doubled amount of

bankruptcies therefrom

– General overspending

Numbers

• Average size of personal loan is $4,402

• Banks usually call between $1,000 and $10,000 personal

• The smaller the loan, the smaller the interest rate

Loan Term

• Banks can offer much longer lending plans

• Average term length is three years– Compared to

average length of seven years for business loans

• Smaller payments vs. less interest

Employment Conditions

• Loans for employed– Higher approval rate

than the unemployed

– Can improve credit score

– More flexible options

• Loans for unemployed

– Approved less frequently

– Granted almost half as much

Supply and Demand

• Banks are supplying– Easy to market– Quick way to jump-

start bank’s business

• People are demanding

– Easy to manage– Quick way to

consolidate debts

Overall Benefits

• More popular form of lending

• Reliable option – When approved by

bank

• Will help boost your personal finances long-term – Increase overall

economic activity