A personal loan is a type of loan offered by banks and finance companies that allows you to obtain a sum of money without providing any physical or collateral guarantee , as are other types of loans such as mortgages or pledges. A personal loan is often needed to cover unexpected expenses, such as buying a car, renovating your home, or paying for a trip. The amount obtained is generally a medium-low amount, depending on the needs of the applicant. TAN and APR are two fundamental parameters used to calculate the monthly installment of a personal loan. The TAN, or nominal annual rate, represents the effective interest rate, or cost of money , applied by the lender to the loan. This rate does not take into account additional costs such as registration fees and bank charges. APR, on the other hand, is the acronym for Global Effective Annual Percentage Rate , which represents the total cost of the loan, including all additional expenses. Therefore, this parameter also includes initial and bank commissions, compulsory insurance and any other ancillary costs necessary to obtain a loan. Therefore, if you want to compare the costs of two different loans, it is important to use the APR: this parameter takes into account of practically all the costs linked to the loan, thus allowing us to understand which of the two quotes is more convenient. In summary, the TAN represents the effective interest rate applied to the loan, while the APR represents the total cost of the loan, including all additional costs. Personal loans can be at a fixed rate or variable rate and typically have a duration of between 12 and 72 months. Therefore, the loan installments will be made on a monthly basis and will remain the same throughout the life of the loan.
There are different types of personal loans to choose from:
- Unsecured Personal Loans : These loans do not require approval for collateral such as a house or car. However, the interest rates on these loans may be slightly higher than secured loans.
- Secured Personal Loans : These loans require you to put up your business as collateral to be approved. This usually means that the interest rate will be lower than that of an unsecured loan.
- Debt Consolidation Loans : These loans allow you to combine all of your debts into one payment, usually at an interest rate that is lower than the total interest on the debt.
- Education Loans : These loans are designed to cover educational expenses such as tuition fees, books, and housing.
- Loans for Truck Drivers : These loans are available to truck drivers and trucking fleet owners to purchase new vehicles or repair existing vehicles.
- Medical Loans : These loans are designed to pay for medical expenses such as cosmetic surgery, dental care, and general healthcare.
- Travel Loans : These loans can help pay for travel and vacation expenses and often have higher interest rates than traditional personal loans.
To get a personal loan you need to submit a loan application and provide some financial information, such as income and monthly expenses. The bank or finance company will then evaluate the request and, if accepted, will stipulate a loan contract which will contain all the details of the loan, from the amount disbursed to the repayment methods.
It is important to carefully choose which bank or finance company to request a personal loan from, comparing various offers in terms of interest rates, methods and repayment methods. Furthermore, before signing a contract, it is advisable to carefully read all the terms and conditions of the loan to avoid unpleasant surprises in the future.