Personal Finance Company: How Can They Help You Get A Loan?

Protecting yourself and your family financially can be an incredibly daunting process, and there may be times where you feel like your options for how to safely borrow money are limited.  

Especially in times like now, the decision to take out a personal loan can seem like a good option, but some personal loans actually end up causing more harm in the long term than doing good in what they solve in the short term.  

In this article, let’s explore some of the best ways to look for a personal loan, how to select a personal finance company, and learn how to avoid some of the most common mistakes made when selecting a personal loan.

What is a Personal Loan?

In the world of personal finance (which is just a term to separate from corporate finance or business finance and covers the scope of the finances of individuals and families), getting a loan can be a very common occurrence, but it can also be a very stressful experience. 

This is due to a number of factors, but the most common factor that causes stress in circumstances where a personal loan is considered is the fact that most of the time, the people taking out a loan aren’t well informed in the decision that they are about to make.

Not knowing what you’re getting into when you take out a loan is arguably one of the worst financial decisions you can make, because without knowing it, you can end up owing double or triple the amount you borrowed if you don’t pay it back quickly and on time. 

Oftentimes, the terms on personal loans include fine print that hike up interest rates, disclose personal information to other lenders, and are designed to get as much profit from the borrower as possible.  

The first step in protecting yourself in this kind of scenario is to understand exactly what a personal line of credit really is.  Essentially, a personal line of credit (or personal loan) is very similar to a credit card account, except instead of making purchases with the card, you can actually request cash to be transferred to your checking or savings account.  At that point, you can then use the cash for any of your usual transactions, like paying rent, getting groceries, or even paying off other loans like a car payment or a student loan.

Just like any other loan, personal loans accrue interest based on a rate that should be disclosed to you before you agree to take on the loan, but unlike Home Equity Lines of Credit (HELOCs), personal loans are not secured, meaning there’s nothing keeping you from completely defaulting on that loan.  

Typically, personal finance lines of credit are offered by banks and credit unions and require you to have a checking account or other type of personal account at that institution.  However, it is possible to receive a personal loan from a personal finance company.  

What is a Personal Finance Company?

Also known as a consumer finance company, a personal finance company is defined as a small financial institution that makes minor loans to individual people.  Personal finance companies are small, usually local businesses that specialize in providing individuals with an influx of cash, usually in small doses and during difficult times.  

A very common type of personal finance company is a company that provides payday loans, which are essentially cash advance loans ahead of a paycheck that have to be immediately paid back. The Federal Trade Commission (FTC) warns against payday loans, saying that they are often designed to prey on people with low income and force high interest rates onto people who just need the money to survive. 

It is, however, recommended to consider a small loan from your financial institution, a credit union, or a more reputable personal finance company as a source of emergency cash.  

How to Apply for and Qualify For Personal Loan

If you decide to pursue the angle of a personal loan, your best option is to contact a reputable personal finance company.  Personal finance companies usually have a wide array of financial planners and financial advisors that are willing to point you in the right direction, talk you through your options, and decide on a course of action that will benefit you and your family directly.  

Here are some of the basic steps to work through with a personal finance company as they help you get a loan on your own.

Discuss APR. One of the first steps that you should discuss when you are looking into taking out a personal loan is what the annual percentage rate of interest on that loan will be.  Oftentimes, personal loans from shady companies will have exorbitantly high interest rates that lead to large amounts of loan defaults.  

For example, some financial institutions offer personal loans of up to $5,000, but have interest rates of over 130% (yes, these really do exist). With rates like that, you will be lucky to ever pay off the loan if you ever miss a single month’s payment.  Make sure that you speak to your financial planner or financial advisor about how to avoid high interest rates.

Determine an amount to borrow.  You really want to make sure that if you’re borrowing in the case of an emergency, that you borrow enough without going overboard.  For example, if you need to cover a month’s rent and a car payment in the middle of the current crisis, make sure that you borrow enough to cover those payments but nothing else.  If you don’t borrow enough, you risk being unable to cover those payments right away, and there can be serious consequences to not paying rent, such as eviction or court fines. If you borrow too much, chances are that you’ll have a harder time paying off the loan and you will in fact default on it as well, end up being charged interest, and struggle to stay above water.

Check your credit score to see how that will impact your ability to borrow. This is something that a personal finance company should definitely be able to cover for you. The higher your credit score, the more opportunities you will have to borrow, and the wider open your options will be. The personal finance company you work with should easily be able to point you in the right direction once you discuss your credit score with them.  

Discuss details. As you go through the selection process, you will probably come across several personal loans that look good on the surface, but it is essential that you be willing to scrutinize these with the personal finance company or financial advisor that you’re working with.  Financial professionals have an excellent eye for the market and can often tell better than the average person when a loan’s terms look too good to be true and when there are hidden fees, hidden penalties, and shifty terms. It’s also worth looking into your payment due date to make sure it fits well with when you get paid from your job. 

Finally, be on the lookout for something called a prepayment penalty.  You will often notice that with more nefarious loan-providing institutions, they will charge you a penalty or a fee for paying off the loan early in an attempt to avoid interest costs.  Make sure you don’t get stuck with one of these because it can be extremely frustrating to make a responsible financial decision like paying off a loan early only to be slapped with a fine for doing the right thing.  Discuss all your options and just make sure you get pointed in the right direction.

Personal finance companies can provide guidance and expertise tailored to your specific situation, so if you’re looking for some help sorting out your money, they can be a very helpful tool.

So, now you know the steps involved with looking for a personal loan. If you find yourself in a difficult financial situation, do not panic. Personal finance companies are always willing to sit down with you to go over your credit report and credit history, take the time to discuss options, and cover all your bases to help you get out of a hole that you’re worried by.  

Turbo Finance is one of your best options for coming up with a path to recovery from financial difficulty, and our experts and advice are always only a click away.  Best of luck on your financial journey!