Personal loans, otherwise known as signature loans or consumer loans—are generally less than $5000. The loan is usually unsecured, which means it is not tied to any asset. Getting the loan is based on your credit report, relationships or your integrity and your ability to make payments on the loan.
These loans can be used for anything you want since they aren’t tied to anything. Use the loan for a vacation, or to buy a new computer. Help pay for college or use it to consolidate debt. Holiday loans are often taken out for short-term gift-giving. And some people will take a personal loan to pay medical expenses or to utilize the money in their small business.
News – Payday Loans
One type of personal loan that generates controversy is the Payday loan. These small, short-term loans are provided by cash advance stores. The loans have one-time fees attached and the term is generally two weeks, or until the borrower’s payday arrives. Legislation was passed in 2009 that limited the amount of the loan and interest on Payday loans.
The new regulations add limits to the loans. The limit is either $700 or not more than 30 percent of a borrower’s income, whichever is smaller. The Payday loan companies vary in their charges and interest rates. If you are looking at these loans, it’s important to check out the fine print.
News – Peer to Peer or Social Lending
Peer to Peer Lending or P2P Lending – is sometimes called Social Lending. With the help of the internet, this new way to lend and borrow money is done as part of a group or club and is handled online. It’s loaning money to the group, or borrowing money to someone in the group. The idea is the borrowers will get a better rate, the interest rates seem to be between 7+% and 19+%. At the same time, investors can get a better return on their investment. These are not funds provided by a financial institution, but by investees who have banded together to form these lending clubs. One estimate projects that is 2010 the peer-to-per lending will be almost $6 billion.
Information – Personal Loan from the Family (Really Close Social Lending)
When getting a loan from a financial institution gets difficult either because of the economy, or because of your FICA score, some of us turn to our families. There are good reasons and bad reasons to do this, but if you treat it like a contract and make a plan and set a payment and time for repayment, you might keep the bad feelings at bay. Here is some advice if you are going to borrow money from a family member or friend.
Figure out an interest rate. Money markets and CDs are down, so look at this as a way for the family lender to get a better return on their investment and you, the borrower get an interest rate that is a lot lower than what you’d get anywhere else.
One way to handle this is to go to www.virginmoney.com. This is a social lending site that is provided by the Virgin family of companies. You know, Virgin Air, Virgin Music, etc. This site allows you to set up a structured way to borrow or lend money to each other. This way there is no question on who owes what and how much. Family ties are kept, well…tied, and friendships stay friendly.
This site helps keep social lending pressure free and yet the process is put in writing, with the terms in writing and the payments automated. How great would that be if you borrowed money from your parents and they knew their payment would be automatically transferred into their account every month? There are all types of features on this website and it is well worth looking into if you are planning on borrowing or lending between family members or friends.
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