a quick guide to personal loans
DESCRIPTION
The spoken and unspoken rules of lendingTRANSCRIPT
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