If you need a bit of extra funding to meet your next life goal, it might be time to consider a personal loan. People get personal loans to help with emergency expenses, adoption costs, healthcare costs, debt consolidation (paying off credit card debt), medical bills, moving costs, tax debt, and more.
A personal loan involves a financial institution (bank) lending you money for a set amount of time. Per the terms of the loan, you agree to pay it back over time. When you pay it back, you also provide the bank with interest – a small, set amount on top of the initial loan amount, or principal. Personal loans are unsecured, which means you aren’t putting up collateral, such as a house or a car, to back it.
You typically apply for a personal loan from a bank, including an online lender. To get a loan, consider how much money you need to borrow. If your needs aren’t related to an emergency, take some time to check your credit report and improve your score if necessary. This can help you land a better interest rate from the bank. The bank looks at your credit to determine how risky it is to lend to you, and this affects your rate. Compare loans and lenders, as well as their rates and terms, and find a good match for your needs.
Larger loan amounts will require a prequalification, but smaller loan amounts may not. If your loan amount does, you’ll go through the prequalification process. When you’ve finished that, or bypassed it if you are not required to go through one, you’ll complete an application for the loan. Be prepared to provide personal information, like your Social Security Number, name, address, birthdate, employer information, income, and additional information about supplemental income. Your lender may also ask about large, regular expenses like auto loan payments, mortgage, or rent.
After that comes the approval or denial, when you are informed about the bank’s decision. If approved, the loan is underwritten by the bank and then disbursed, or given to you. Your bank will let you know when your first payment is due.
Whether you should get a personal loan depends on your situation. While a personal loan will most likely help immediately, you will suffer a hard check on your credit score, which will make your score dip. If you need to apply for another type of loan in the next year or so (like a mortgage), you may not want to apply. However, if the loan is a short-term one and you pay it off before your next loan application, it’ll look favorable that you’ve paid it down.
If you’re able to borrow money through friends or family in part or in whole to cover your expenses, that might be a better option for you, as the bank charges interest. However, the bank can reliably get your funds to you shortly after you are approved.
Pros of personal loans include flexibility. Generally, banks aren’t concerned with restricting how you use the funds. While they might ask, you can generally use personal loan funds however you want. Additionally, you don’t have to put down any collateral to get loans, so as long as you have decent credit and income, you may be able to get one. Lastly, personal loans offer fixed payments and interest rates, meaning you’ll know exactly how much you need to repay each month, and for how long. This can help you budget effectively.
Personal loans also have cons including the immediate hard check on your credit score (negative impact). Personal loans have higher interest rates compared to other types of loans as well. Finally, personal loans get other fees tacked onto them, albeit transparently, such as loan origination fees and application fees. This is standard, but a negative aspect of getting a personal loan.
You’ll want a loan that has clear and decent terms, works with your budget for repayment, and is simple to acquire. Generally, loans that can be repaid via a web interface are considered more convenient. Many people go directly to their bank or an existing lender if they already have a good relationship, but if you’re looking for a smaller personal loan amount, it’s best to shop primarily based upon your needs.
The best place to get a personal loan will provide convenient methods of repayment, clear terms, and a customer service representative so you can speak to someone if you have a question or concern.
Personal loan interest rates and fees vary based upon the bank’s offered interest rates. During your initial inquiry, the bank will be able to provide a range at which the bank is offering loan terms. You may also be able to choose repayment terms – for example, a slightly higher interest rate for a longer term, which lowers your monthly payment overall while your total repayment amount is a little higher.
