I definitely need to understand personal loans

You’ve been outed of a conversation of personal loans because you don’t understand even a bit? We can help you. Here you’ll find the most important details so you can finally understand personal loans. As well, it will be of great help for any time in the future you need to ask for a loan. 

This #MoniMonday works as a summary in your language for you to feel comfortable talking about personal loans. To begin with, you’ll find answers to the most basic questions on this matter. Afterward, you’ll find a glossary with the most common terms related. And the end, you’ll find our suggestion for the next time you find yourself in the need of requesting a loan in Costa Rica.

What’s a personal loan?

It’s the money someone asks for to a regulated entity. The requestor then needs to give it back, following some conditions.

With this explanation, you might think about the last time you ask your girlfriend to pay for your ticket on the bus because you had no cash. Or maybe when you asked your brother if he could help you with some money while you receive the money from your last freelance work. This couple work as loan examples, though, here we’re referring to personal loans given by a regulated entity that fills a list of conditions to be able to give you the money you need.

First of all, a loan involves a defined amount of money and a defined time in which the borrower (the one who receives the money) should be paid back to the lender (the one who gives it).

How can a loan be useful to me?

They are really helpful in circumstances such as that moment when you have are out of liquidity to pay a debt or you are about to make a purchase and you have no money to do it. Loans are really useful as well for the day of the month when you should be paying your credit card or your college. Small entrepreneurs could also find great use for a small loan when they’re just starting their company.

Why a loan involves ask you for certain requirements?

There’s a risk for the lender when lending the money. As the borrower fills each requirement on the list, the risk gets smaller or the risk reduces, and the borrower becomes creditworthy.

How can the loan be paid?

Since day one, the lender lets the borrower learn about the amount that needs to be paid every month, so the total amount can be reduced progressively.

We hope you’re doing well with the answers that will help you to understand personal loans. These are some terms you might want to check and study afterward. 

Lender: who lends the money and then will collect it back.

Borrower (or debtor): the person that receives the money with the commitment to pay it back.

Guarantor: responds in the name of the debtor in case she/he is unable to pay the debt. (In some cases a guarantor is not required, in cases such as MoniPlus+)

Interest rate: the value assigned to the lent money. It’s represented with a percentage defined according to the total money involved and the term set originally. 

Loan principal: the money that you received from the lender, who’s going to collect it back including the corresponding interest rate.

Total due: it’s related to the total amount of money you asked for, plus the interest rate and additional expenses related to the loan.

Monthly fee: when receiving a loan, there’s an amount set that should be paid each month. 

Term: the length of the time that the borrower will need to finish the payment of the loan. It’s something set since day one.

One-off Payment: An additional amount of money the borrower pays to the lender besides the monthly fee. The one-off payments help the borrower to complete the term faster than originally expected.

Credit record: all the financial activities of the borrower are included here, including previous loans, and the detail about if they were already paid or not.

Creditworthy: a condition approved or rejected after the lender studies the credit record of the borrower to determine if he/she should receive the requested loan.

And this is what we have for you on this #MoniMonday. Now you’ve completed the Loans Curse Level 1 and now you’ll feel more confident about requesting a loan using MoniPlus, the new service in the super app. It’s a way for you to do the whole process using nothing more than your smartphone and being able to receive the requested money in just 20 minutes.

Was this information helpful for you to understand personal loans? Let us know in the comments section. 

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