Magical Credit Blog

A personal loan is a loan provided by a lender to a borrower to help finance a large purchase or project. Borrowers obtain personal loans for two primary reasons:

1. They do not have the capital to fully supply their own funds for their intended use.

2. Even if they do have the funds to pay for it entirely, they may have other opportunities they want to pursue and allocate their capital towards.

If you’ve ever gotten a loan declined in the past, it is easy to get stuck wondering where you went wrong. However, when a lender declines your loan, it is usually not a personal decision. Each institution has defined parameters on the types of borrowers they can and cannot lend to. If you as a borrower fall even slightly outside of these parameters, the institution may opt to play safe and decline the application.

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If you have regularly created budgets for your monthly expenses in the past, chances are that you have needed to add some large expenses from time to time that are over and above your regular expenses such as your rent, food, transportation costs, etc. Maybe your car broke down and needed urgent repairs to get back on the road. Or maybe you are planning for your upcoming wedding. Whatever the case may be, these expenses can often compromise your best-laid plans, and prevent you from meeting your savings and investment goals. However, it doesn’t need to end that way!

If you have worked with a bank to obtain a loan for personal or business purposes, you have likely seen that the process to do so is rigorous and comprehensive. At their core, banks are for-profit enterprises which means that they have fiduciary duties to prudently manage their shareholders’ capital and only lend to people and businesses that meet certain risk criteria. Each bank has its own criteria and requirements for lending that prospective borrowers have to abide by to receive a loan or any other debt product. However, there are certain common items that every bank evaluates in order to make a lending decision.

Unexpected circumstances happen all the time in life. Things like emergency car repairs, health issues, and other non-budgeted expenses can come seemingly out of nowhere and squeeze the monthly financial budget that you worked so hard to maintain. At times, these expenses can rack up fairly quickly and go beyond the amount you can reasonably afford to spend at a given time all at once. For these reasons, a loan that is priced at a fair rate can be an option to bridge your short-term financial needs without having to eat into your other necessary expenditures such as rent, food, gas, etc.