The reason for getting a personal loan is yours, but your prospective lender can determine the important factors of the loan based on that reasoning. Regardless of why you need a personal loan, compare lenders to see which one offers the best deal for your needs. Avoid borrowing more money than you need and look for a lender who has a reasonable repayment plan. Founded in 1976, Bankrate has a long history of helping people make smart financial decisions.
Personal loans are borrowed money that can be used for large purchases, debt consolidation, emergency expenses and much more. These loans are repaid in monthly installments over the course of a few months or more than a few years. It may take longer depending on your circumstances and the diligence with which you make payments. After you are approved for a personal loan, the funds you receive will be deposited into your bank account in a lump sum. The transfer can take as little as 24 hours or a few weeks, depending on the lender.
You will need to start making monthly payments as soon as the loan is disbursed.
Debt Consolidation with Personal LoansDebt consolidation is one of the most common reasons to apply for a personal loan. When you apply for a loan and use it to repay multiple loans or credit cards, you're combining all of those outstanding balances into one monthly payment. This pooling of debts makes it easier to set a time frame for paying your balances without feeling overwhelmed.
Emergency Expenses with Personal LoansIf you need money for an emergency, using a personal loan instead of a payday loan can save you hundreds of dollars in interest charges. According to the Federal Reserve Bank of St.
Louis, the average APR for a payday loan is 39.1 percent, while the maximum interest rate on a personal loan is typically 36 percent. Personal loan funds can help you move your household belongings from one place to another, buy new furniture, transport your vehicle across the country, and cover any additional expenses. Using a personal loan for moving expenses can also help you stay afloat if you move somewhere without work. This way, you can avoid looting your savings or emergency fund.
What Can You Use A Personal Loan For?Some loans are designed to be used for a certain purpose, such as car loans or mortgages. However, personal loans can be used for many purposes, and a lender may not verify if funds are being used as intended in the loan application.
But it's a good idea to review the loan application to understand any restrictions on the use of funds. Loan applications apply for your annual income and may include money earned from part-time work. Consider increasing your income by starting a secondary activity or working towards an increase in your full-time job.
What Are The Benefits Of A Personal Loan?A personal loan is a form of credit that can help you make a large purchase or consolidate high-interest debt.
Because personal loans often have lower interest rates than credit cards, they can be used to consolidate multiple credit card debts into a single, lower-cost monthly payment. The list of common purposes for a personal loan includes financing a large purchase, covering an emergency expense, and consolidating debt. Personal loans, which are usually unsecured, are repaid in monthly installments with interest. Most lenders will look at your creditworthiness and other factors to determine your interest rate.
Should You Take Out A Personal Loan?You should always evaluate the purpose of a loan to determine if you need to take out a loan and if you have the ability to make payments. A personal loan can be used for almost anything. Some lenders may ask you what you intend to do with the money, but others will just want to make sure you have the ability to pay it back. While personal loans aren't cheap, they can be a viable option in a variety of circumstances.
Here's how to decide if one is right for you: If you need a quick cash inflow to pay the necessary expenses, a personal loan may be a good option. After all, taking out a personal loan means getting into debt, and you'll have to be prepared to repay that debt for a few years. You can also consider a personal loan if you need to take out a loan for a fairly short and well-defined period of time. But the borrower's reason for needing a loan can also be a factor, because the amount of money needed and the way the debt can be repaid, which could be influenced by the underlying need, could make some types of loans fit better than others.
Advantages & Disadvantages Of Personal LoansUltimately, if a personal loan makes it difficult for you to pay all your bills on time, you may want to consider other options. Like any other type of credit, a personal loan has both advantages and disadvantages, depending on your specific financial situation. Personal loans are a great way to consolidate debts and make major purchases, but you should always use this financial resource responsibly. In addition, more than 80% of all payday loans are extended or extended to another loan within 14 days, according to the Consumer Financial Protection Bureau.
Prequalifying For A Personal LoanIf you meet the minimum requirements of a lender and want to see the estimated rates and terms, you may prequalify for a personal loan. Personal loans allow you to buy major household appliances and electronics right away, especially if you need them for regular use. At the end of the day, a personal loan can be used for almost anything, which is why it is classified as “personal”. If you owe a substantial balance on one or more high-interest credit cards, taking out a personal loan to pay them off could save you money.
In addition, because there is usually no collateral tied to a personal loan, it is a less risky form of financing than secured loans, such as mortgages.