Consumers who need a personal loan review the provisions and expectations of most loan contracts. The differences between unsecured and secured loans could help the borrower assess their options. Lenders who provide personal loans follow specific guidelines for eligibility and managing the contract.
Reviewing Credit Scores and Eligibility Requirements
Lenders review credit scores initially when establishing the borrower’s eligibility. Certain personal loans require consumers to meet eligibility requirements based on credit scores. Next, the borrower reviews their credit history and verifies the borrower’s income. If the borrower has a limited credit history, collateral is needed.
Using Collateral to Secure the Loan
Consumers who haven’t established credit are required to offer collateral when securing a personal loan. With most banks and traditional lenders, the collateral is often an automobile or real estate. Loans obtained to purchase the assets are secured by the automobile or real property. The terms allow the lender to seize the asset if the borrower defaults on the loan.
The Rights of the Consumers
Consumers are required to fulfill all terms of their personal loan contract. The terms require the payment on a predetermined date. If the payment isn’t submitted on time, the lender applies late charges and finance fees. If the account ends up in collections, the consumer’s rights are protected. The collection efforts cannot involve harassing phone calls, and lenders must inform the consumer if legal action is possible.
Statutes of Limitations for Personal Loans and Legalities
Lenders and collection agencies must comply with the statutes of limitations that apply to personal laws. The statute in most states begins when the loan account is closed by the lender. The statute runs out between seven to ten years in most states. If the lender doesn’t collect the debt before the statute runs out, the lender cannot take any legal action against the consumer.
Consumers obtain personal loans according to their credit scores, credit history, and income. The lenders assess the details and determine if the borrower is eligible and the loan value available to the borrower. All terms are explained to the borrower when they accept the personal loan. Consumers who need a loan are encouraged to learn more right now.