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What is a Personal Loan and How Does It Work?

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Credit cards aren’t the only option when looking at ways to consolidate debt or finance a big purchase. Personal loans offer another borrowing tool consumers can use when they need funding. However, before applying for personal loans in Florida, there are certain things that you should know about, such as how they work and how to find the right one.

What is a personal loan?

A personal loan is a one-time sum borrowed from a lender. Personal loans can be considered a type of installment credit, where the borrower pays to the lender the borrowed sum plus the agreed interest in installments or monthly payments. Personal loans usually have terms ranging from six months to five years.
Personal loans in Florida can be obtained from banks, credit unions or online lenders. You should use personal loans only when needed.

How are they different from credit cards?

Personal loans and credit cards share some similarities, but they also have some differences. With personal loans and credit cards adopting a credit score system, personal loans, unlike credit cards, give the borrower the sum in the form of a one-time payment. This means the borrower does not have continuous access to funds. A personal loan has a limited repayment duration.

Credit card users will keep having access to funds as long as their credit score is good, and they are in good standing with their credit card company. Personal loan and credit card arrangements can contain various conditions and requirements.

How long does it take to receive my money?

Various lenders have differing durations; some could take a whole business week, and others could take less than one hour. When you applied, how quickly you provided the necessary documents, and whether you met the requirements for the loan are the main factors determining how long it takes to receive your funds.

How do personal loans work?

So how do personal loans work? Personal loans can be unsecured or secured. When using a secured loan, lenders ask borrowers to submit collateral of similar value to their loan. The lender will take that collateral from the borrower if they default on their loan. Unsecured loans do not require collateral, so defaulters take damages to their credit score and, in some cases, can be sued. Unsecured loans typically come with higher interest rates because the lender is taking more risk.

Apply for a personal loan

Applying for personal loans in Florida shouldn’t be complicated, but it is essential to do some research before applying for one to help speed up the process. Check around to see where you could get the best rates and be sure that you meet the requirements before applying. This will reduce the chances of your lender denying your application.

After submitting your application, you must wait for approval, which could take a few minutes or several days. When your loan is approved, you can follow the steps provided by your lender to acquire your funds.

What criteria do lenders look at?

When applying for personal loans in Florida, there are some essential criteria that most lenders look at. Your payment history is among these criteria, as this would give your lender an idea of your creditworthiness. Your income or salary is another factor that most lenders check; this will enable your lender to know if you can repay your loan.

What to Look For in a Personal Loan

There are several factors to consider before applying for a personal loan. Some factors vary with the type of loan you are applying for. Below, we will look at some of the primary factors to consider.

Upfront and Early Payoff Penalties

An upfront and early payoff penalty is a levy lenders impose for paying off your loan early. This is a factor to consider when applying for a personal loan because you won't want to pay an inconvenient sum of money when the opportunity to repay your loan early presents itself. Be sure to do your research and inquire about all penalties associated with your loan.

Interest rates

Interest rates are a major determining factor when applying for a loan. However, several factors determine your interest rate, such as your credit score, loan term period, monthly payment, etc. The goal is to get the lowest interest rate possible and a convenient monthly payment.


Personal loans can be very helpful because anyone can be in crucial need of money at any time. When applying for personal loans in Florida, always make sure you do your research before applying. People sometimes get bad deals because they jump on their first offer. How personal loans work can vary, not all lenders function similarly. Make sure you know all there is to know about your lender before signing any form of agreement.

Not all debts are bad, and people sometimes find themselves in rough situations. Always make sure you need the money and can pay it back before taking out personal loans because loans can hurt your credit score, disqualifying you from future loans if you are late with payments or don’t pay them back.