Everything is getting more convenient these days, and the mobile phone and app ecosystem has been a driver of this convenience in a big way. You can pick up your mobile device and at the tap of a button, a car can arrive and take you anywhere you want to go. You can book travel to anywhere on earth, buy groceries, and video call someone on the other side of the world in an instant.
Almost every industry has taken advantage of what this app ecosystem can do to create a new business or make doing business faster and easier, both for the business and their customers. This is because these apps and the underlying technologies can automate many processes that used to be done manually, and there’s no better industry to take advantage of this than personal finance. Banks and financial institutions haven’t let the opportunity for convenience pass their business by either, offering innovative products and solutions to enhance their accessibility and convenience.
What Exactly is a Personal Loan?
A personal loan is a relatively small, unsecured loan offered to individuals by banks or other financial institutions. Usually, this loan will be for a short period of time and offered in fixed monthly payments over the loan period. These loans are typically offered over a period ranging from about 2 to 5 years, but some banks may offer longer periods.
Personal loans vary wildly in the interest rates offered, with annual percentage rates from as low as 5% to as high as 35% or more. They’re often sought by those with unexpected expenses, to consolidate debt or just for holidays and other expense because they can offer interest rates lower than credit cards.
How Do Personal Loan Apps Work?
The personal loan app removes all the tedium from applying for finance from your bank or financial institution because you can do it all from within the app. You don’t need to physically go to a bank or fill in long forms, but the outcome is very much the same as if you had done. Personal loan apps can often feel less serious or formal than traditional application methods but are no less legally binding.
The first step will usually be to indicate how much money you’re looking to borrow and how long you need to pay it back. You’ll have to provide proof of identity as well as your income sources and what you earn during the initial application process too. Most often, these apps will have a large level of automation built into them and will do a credit check in the background. Some will be able to approve your application right away, while others might submit it all for verification.
If approved, just like a traditional personal loan, the funds will be deposited into your bank account within a couple of days. Use this link to get more info and reviews of personal loan providers, to help you make a more informed decision.
A Quick Note on Payday Loans
Personal loans differ from payday loans because payday loans are incredibly high-cost loans designed for small amounts of money to be loaned for very short periods of time, typically just until your next payday, which is likely only a couple of weeks away. The credit checks are often less stringent and the cost of borrowing money in this way is much higher than a personal loan.
While payday loans seem like a good idea on the surface, thanks to their high-interest rates and initiation fees, they’re usually more expensive than a personal loan, even if the personal loan has longer repayment terms. If you need that extra cash injection during the month, consider both options carefully and see which will be more cost-effective.
Some General Tips for Finding a Personal Loan
The first piece of advice we can offer is to consider the reason for your loan carefully before you decide to commit to it. While sometimes it might feel like a good solution to escape a particularly tight financial situation, you might just end up worse off than before because of the monthly fees and payment associated with a personal loan. The best tip you’ll be offered, however, is to make sure to shop around for your personal loan. Offers will vary quite a lot from bank to bank and the interest rates and fees with it. Read the terms and conditions and consider the interest rates and fees carefully before committing to a personal loan.
Personal loan apps are very much a thing, and they’re here to stay and evolve. While they offer us a convenient platform to apply for finance quickly and easily, removing tedious and unwelcome trips to the bank and paper forms, they have some real downsides too. Always remember to borrow money responsibly and to think it through before doing so.
Most importantly, when looking for finance, shop around for the best interest rates and fees, both in these apps and out.