Personal loan to buy land is one of many creative ideas creating fortune. Yet, is it really for you? Or maybe you are wonder if personal loan for self-employed is a good idea? How hard is it to get personal loan? The best thing to answer those questions is to understand what is personal loan, the advantage, fees and other important things around it.
Every businessman who wants to find a loan, will usually always run into personal loan. Of course, as a type of loan, this also has certain conditions that must be fulfilled by the customer.
What are the advantages, disadvantages, and other important information about personal loans?
What is Personal Loan?
As the name implies, you can do loans through this method without providing any collateral.
Personal Loan is a loan product that provides debt facilities without charging prospective customers to prepare an asset to be used as collateral for the loan.
That way, there is no asset that you must give as collateral of the loan. In this case, the lender only makes lending decisions based on your credit history. In general, a credit history is built when you have a credit card, motorcycle loan, car loan, mortgage, or low interest loan. In its use, there are several benefits that are often utilized from personal loan. One of them is for consumption needs. It is still broad and varied. In this case, your ability to fulfill the obligation to repay the loan is a substitute for collateral.
Personal Loan is very suitable for those of you who don’t want to submit assets you have as loan collateral. This type of loan will also have a relatively faster disbursement time, but the nominal loaned also has a limit that is not too large (or depends on the lender).
Usually, the maximum amount that will be issued by the lender is only around $50,000 – $100,000.
In this type of loan, the interest offered will usually be relatively high.
Make sure you have carefully considered the installments that will be paid later and it won’t be bothersome in the future.
The tenor or credit repayment period, personal loan is usually given for about 5 years.
Personal loan tends to be used by customers for urgent matters, such as wedding cost, renovating houses during the rainy season, buying goods for business purposes or paying whatever you want with the loan.
Advantages and Disadvantages of Personal Loan
Advantages of Personal Loan
1. Instant disbursement – In just 1 to 7 working days you can get the money you borrowed. But this depends on verification from the lender and the completeness of customer documents.
2. No need for collateral assessment – Because this loan does not require collateral for the goods or property of the prospective borrower, the lender does not need to carry out the collateral assessment process first.
3. As an emergency fund – because of the fast disbursement of this loan, personal loan is often used for sudden needs, for example a businessman who suddenly gets a business opportunity. In addition, personal loan is also often used for medical expenses, education, or consumptive use.
Disadvantages of Personal Loan
1. High interest – The risk that must be borne by customers who take personal loan is having to pay high interest. Lender apply high interest rates as an effort to minimize the risk of loss, which is different from other kind of loan with collateral where the lender’s risk is almost 0%.
2. Shorter term – In Personal Loan, the duration of time for repayment is generally shorter when compared to other loan products. In general, the longest personal loan is 5 years on the grounds of anticipating bad credit.
3. Smaller loan amount – For personal loan products, the loan size ranges from $10,000 to $100,000. This amount can be seen from the payroll or credit card limit. Your loan amount is allowed to be between two and three times that amount. The lender will also ask for requirements in the form of tax information for customers who apply for loans of more than $75,000.
4. Fines – If the borrower fails to pay installments or experiences bad credit, the lender will send a collection to the address concerned and if this effort does not bring results, the lender will file a criminal suit. In this last condition, the borrower’s assets can be confiscated and included in the lender’s black list. The result in the future is that borrowers can have difficulty making financial transactions.
Personal Loan Fees
In general, lender will only charge prospective borrower with administrative costs, and so on, there are no other costs that need to be incurred.
Prospective borrowers do not need to incur other costs just to speed up the completion of the personal loan application process.
No tricks and no unnecessary gimmicks. There is only one type of cost of all kinds, namely administrative costs.
The amount of administrative fees also varies, depending on the lender where the prospective borrower will take the loan, and also depending on the policy of the lender in question.
Sometimes certain lenders will charge a provision fee whose amount is determined by them.
For example, Standard Chartered Bank, where there are two important cost components, namely administrative costs and accelerated repayment costs.
#Administration fee: a late fee 6% of the monthly installments.
#Accelerated repayment fee: if it is less than or equal to 24 months, a fee of 6% of the remaining principal plus an administrative fee of $20 will be charged. If it is more than 24 months, the fee charged is 6% of the remaining principal of the loan.
In addition to the two fees mentioned above, Standard Chartered also offers online and regular personal loan, in which there are two cost components, namely an annual fee and a provision fee. Provision fees are generally charged only in the first year, which is 3.5% of the approved loan amount.
There is also an annual fee that applies from the 2nd to the 5th year, with the amount of $6 per year.
In the special type of personal loan for prospective borrowers who work in selected companies, a provision fee is charged at 2% of the approved loan amount. Meanwhile, the annual fee that applies from the 2nd to the 5th year is around $6 per year.
Now, do you understand about Personal Loans?
Here’s quick summary of personal loan:
Collateral: No
Repayment terms: 1 to 5 years
APRs: 5.94% to 35.99%
Credit score: 600s, depending on the lender
Personal loan to buy land might not be a wise idea, because buying land is not an urgent need. Personal loan for self-employed will be good if you are having sudden needs or opportunity like business order that require more money as capital. Be wise benefiting from personal loan.
