Your Guide To Personal Loans
Affordable loans are not hard to come by, but each borrower is different. Your interest rate and loan limit may be extremely different from those of other borrowers based on your credit score, financial situation and credit history.
Before securing personal loans of any kind, it’s important to consider your needs. In many cases, there are other types of financial assistance programs that make the most sense. However, many credit unions and banks offer enticing rates and discounts on these types of loans. Continue reading to see when getting a personal loan is right for you.
What is a Personal Loan?Personal loans are used for dozens of reasons by borrowers all around the world. Unlike a mortgage or auto loan, a personal loan is not designed to finance limited purchases. When you buy a house, you need a mortgage; when you lease a car, you need a car loan. If you want to take a trip, do some home improvements or give the kids a big Christmas, a personal loan might do the trick.
Many financial institutions offer these loans at affordable interest rates for borrowers with solid credit scores. If your score is at least 700, a personal loan might offer you the best overall value versus maxing out a credit card. Rather than paying 24-28 percent interest, you can often settle for 5-20 percent.
It is important to note, however, that personal loans often come with a shortened payback period. Of course, loan terms vary by bank or financial institution. However, the monthly payments are generally higher due to a fixed term of two to five years.
What Can I Use Personal Loans For?There are many reasons for securing affordable loans for personal use. Depending on your wants, needs and finances, you may find yourself looking for immediate access to cash.
Personal loans are easy ways to get around a debt consolidation loan. Simply apply for the loan, receive your money and pay off any lines of debt you might have. You will knock down your interest rates while combining all monthly payments into one easy-to-manage monthly bill.
These loans are also great for refinancing existing student loans. Many banks and financial institutions recognize the need for refinancing, especially for those who have several open accounts. Many find they can lower their interest rate by up to two percent, which knocks off hundreds of dollars every month.
One of the most common reasons for securing a personal loan is to finance the cost of a wedding. Even small weddings can climb into the thousands. If you are planning a wedding and are considering putting certain expenses on a credit card, consider a personal loan. You will likely get a better interest rate and have more time to pay it off than with a credit card.
Applying for Personal LoansApplying for personal loans is easy. Most banks and financial lenders provide online applications for a quick and easy approval process. In fact, many banks reach out to borrowers and notify them of certain pre-approval offers.
Before you apply for these affordable loans, be sure to review your credit history and score. Your score plays an integral role in determining your qualifications, interest rate and loan amount. Be sure to fix any discrepancies and increase your score if possible before applying.
In the months leading up to your application, try to avoid opening other lines of credit. Doing so will increase your total debt-to-income ratio, which results in higher interest rates and lower loan amounts. Take the time to pay down your cards as much as you can before you apply.
Do some research into the best personal loan lenders in your area. It’s a good idea to compare rates and loan terms before settling on one bank or financial institution. Many lenders will pre-approve you before you receive any funds, so be sure to ask about the preapproval process.