What Is A Personal Loan?
First, what exactly is a personal loan?
A personal loan is money that you borrow from a bank, local credit union or an online lender. The money is paid back over time with installment payments, usually monthly. Depending on the amount borrowed, a personal loan will typically be paid back over the course of 1 to 7 years.
Most personal loans will be unsecured which means that there is no real property being used to guarantee the loan. Occasionally, a personal loan could be secured by property. In these cases, a lender would have the right to seize the property in order to settle the loan if you were to default.
How Hard Is It To Get A Personal Loan?
If you have good to excellent credit, it is very easy to get a personal loan from either a local bank or an online lender. Good credit is generally considered anything over 670. With such a score and a good source of income, you will likely be able to secure a loan with a reasonable interest rate.
But what if your score is not so good?
If your credit score is below 670 but still above 580, you have fair credit. You will still generally be able to secure a loan, but the terms will not be as favorable. Interest rates and loan fees are likely to be much higher than a loan for someone with good to excellent credit. On a loan with fair credit, you will have to consider whether the interest and fees are worth the benefit of the loan. For example, if you are looking to consolidate credit cards and are offered an interest rate of 10 percent, it might be worth it. If, on the other hand, you are offered an interest rate of 20 percent, it is not such a good deal.
Now, what about bad credit?
With bad credit and a credit score below 580, you still may be able to qualify for a personal loan. Of course, you will have to do some hunting. The majority of lenders will turn you down at this credit level and the ones that approve you will charge very high interest and/or fees. At this level of credit, you should only use a personal loan for an absolute emergency and even then, consider your options.
Applying For A Loan
So how do you apply for a personal loan?
You have two basic choices, local and online. Local banks and credit unions can get you a personal loan but they can take days, if not weeks. If you want your money fast or if you have poor to bad credit, online is likely the best way.
If you decide to go the online route, we can help you get an offer online. Just click on the following link to get a instant loan quote. Fill out one simple form and get an offer from one lender. If you like the offer, you can have money in your bank account as soon as the next business day.
As far as loan terms go, these will be set by your actual lenders. We ourselves are not lenders, we simply get you access to a large group of lenders.
What Are Personal Loans Used For?
Personal loans are used for a variety of reasons. Most commonly they are used to consolidate debt or to make a large purchase.
With the average credit card interest rate being over 17 percent, it is easy to see how big of a problem credit card debt is. A personal loan can help you solve this problem, if you have good credit.
With good to excellent credit, you can get a personal loan with a much lower interest rate and pay off those cards. If you are carrying 10,000 dollars in credit card debt, simply going from an interest rate of 17 percent to 5 percent can save you over 1200 dollars a year.
If your credit is not in the good to excellent range, you need to be careful when taking out a loan for debt consolidation. You need to make sure that there will be a real savings by comparing the APR of the loan to your credit card interest.
Making Large Purchases
Another common use of a personal loan is to make a major purchase. This could be for a major home repair/remodel or it could even be to simply take a vacation.
When using a personal loan to make a major purchase, make sure that the cost is justified by the benefit. For example, if you are using the money for a vacation, is it worth borrowing 5000 dollars to pay back 8000 dollars? If this is a honeymoon, maybe. It it is just a standard family vacation, maybe not.
Besides the cost, you should also determine if you have a better option. Homeowners, for example, may be better off taking out a HELOC ot Home Equity Line Of Credit. In short, consider all of your options before pulling the trigger.