Is a personal loan for me?

Life doesn’t always go the way we expect and sometimes we may need a sudden chunk of change to manage until the next month. Or perhaps we have a big event like a wedding or an awesome vacation planned that could really use the extra boost. Maybe some of our home appliances are on their last breath and it’s time to upgrade. Whether we like it or not, we need money to achieve a lot of our life goals. Usually we can make do with our monthly paychecks, but sometimes a little extra cash flow will help us reach our spending goals. This is where personal loans can be helpful.

A personal loan is often borrowed to meet emergency personal needs, but can also be used for many other purposes. Personal loans are taken from banks or organizations, which lend loans after making a clear agreement about when to make repayments, including specific payment due dates and the number of installments.

There a variety of personal loans to fit many unique needs. Usually personal loans are unsecured short-term loans. These loans charge a monthly fee and interest rate, which vary and depend on multiple factors, including your credit score. Personal loans offer flexibility and let you use the money for whatever purpose you choose, whether it’s home improvements, debt consolidation or purchasing big ticket items. Sometimes you might be asked what you intend to use the money for when you apply for the loan, which may factor into the lender’s decision. As long as you plan to use the money for a legitimate purpose, you should be fine. If lenders have specific rules about what the loan can be used for, then you should be able to read about that before applying.

How much can I borrow?

Unsecured personal loans are usually offered from as little as $1000, to up to $50,000. Loans vary from vendor to vendor, in regard to interest rates and fees, so it’s important to read the fine print before taking a loan. Some loans only have monthly fees, whereas others also include establishment fees and annual fees.  Interest rates also vary greatly, some being fixed, while others are variable.

One thing to be aware of is that most personal loans require the borrower to have a good credit score, 680 or higher, to be approved. Borrowers with good credit are usually approved quickly without having to wait for days. However, there are also many loan options for low-credit borrowers. (link)

Before you apply for a personal loan, make sure you know your credit score. You can check your credit score from websites online that give credit reports. Most people make the mistake of applying for personal loans without a clear picture of their loan status. Find our your credit score from one of the three major credit bureaus: EquifaxExperian, or TransUnion. If you have bad credit, make sure you take steps to improve your credit score.

How do I pay back my loan?

Unsecured personal loans are usually paid back between one and seven years. The amount you pay in each installment is a combination of the principal amount borrowed, in addition to interest that has been accumulated, according to the terms of the agreement. You will be required to make the payment every month to the lending institution or bank that you borrowed money from. The amount that you receive will be approved according to your credit score or and to the lender’s assessment of your capacity to pay back the loan.

Another detail to pay attention to is if there are any repayment restrictions. Some lenders allow borrowers to make extra payments to pay back their loans earlier; whereas other loans may not allow this, or charge penalties to do so.

What is an unsecured loan?

An unsecured loan is a loan that is given without any collateral. In other words, it is supported solely by the borrower’s creditworthiness. Other types of loans use things such as property as collateral for the loan, so borrowers usually must have high credit ratings to be approved for many unsecured loans. Unsecured loans are also referred to as signature loans or personal loans.

Because the lenders take more risk, unsecured personal loans usually have higher interest rates. This way if a borrower fails to pay back their loan, at least the lending institution will have received more interest from the loan.

Things to consider

There are so many loans out there, so it’s good to know what you’re looking for and what factors are important to consider.

You should always pay attention to the interest rate. Make sure you find a loan with a competitive interest rate and check whether it has a fixed or variable interest rate.

It’s also important you check what the minimum and maximum loan amounts you can borrow from the lender are. Some loans are only for $1,000, whereas others can go up to $50,000. Make sure the amount you want to borrow is covered by the loan.

Most loans also have fees and charges connected to the loan. Sometimes you will be charged upfront, and other times there are ongoing fees. The APR will have an overview of the cost, including any fees. Make sure you are aware of fees and charges because they can add up to a lot.

You should also check if you loan has extra features that are important to you. This can include something like online access to managing your loan, or reminder emails about due dates.

 

Taking out a personal loan is not a decision to take lightly. Adding more debt to your personal finances can become a burden. However, it doesn’t need to be. If you can responsibly borrow a loan and know you will have future capabilities to pay it back, a personal loan may be a good choice for you. The process is simple and borrowing a bit of extra money can make your life easier.

 



You are more than your credit score. On Upstart your education and experience help you get the rate you deserve.

Max loan amount:
$50000
Min Credit Score:
620
Age:
18 years
A good personal loan:
  • Good for those with little credit history
  • Origination fee: 1% to 6% of loan amount, depending on borrower’s grade
  • Late fees: Greater of $15 or 5% of payment amount
  • Personal-check processing fees: None
  • Are you paying more than 10% interest on your credit cards? SoFi Personal Loans could help you save thousands. With low personal loan interest rates and a fixed monthly payment, you can get loans to pay off credit cards, pay off high interest debt, or make a major purchase. It only takes minutes to apply.

    Max loan amount:
    $100000
    Min Credit Score:
    0
    Age:
    18 years
    A good personal loan:
  • Good for those with little credit history and high income
  • No origination fee
  • SoFi offers networking events and career development advice to borrowers
  • Late fees: 4% of payment due or $5, whichever is lower
  • Personal-check processing fees: None
  • Loans for your life. Consolidate your high interest loans and save. Although that you can’t borrow your way out of debt, consolidating all of your high interest loans into one debt consolidation loan through Prosper could save on the amount of interest you’re charged each month.

    Max loan amount:
    $35000
    Min Credit Score:
    640
    Age:
    18 years
    A good personal loan:
  • Suitable for those with good credit profiles
  • Origination fee: 1% to 5% of the loan amount, depending on the borrower’s Prosper grade
  • Late fees: Greater of $15 or 5% of the payment amount
  • Personal-check processing fees: None
  • With a fixed rate and fixed term, personal loans could help you save hundreds—or even thousands—of dollars by eliminating higher-interest debt. A Discover personal loan, which has no origination fees, is an ideal solution for people with good credit and a strong financial history.

    Max loan amount:
    $35000
    Min Credit Score:
    660
    Age:
    18 years
    A good personal loan:
  • Available in 50 states
  • No origination fee
  • Late fee: $39
  • Accepts payment by phone, personal check and mail, among other forms
  • The first step to financial wellness is taking control of your credit card debt. The Payoff Loan™ gives you the power to reduce multiple high-interest payments into one low-rate monthly payment.

    Max loan amount:
    $35000
    Min Credit Score:
    660
    Age:
    18 years
    A good personal loan:
  • Loans can only be used to pay off credit card debt
  • Origination fee: 2% to 5% of loan amount, depending on length of loan
  • Late fees: None
  • Personal check processing fees: None
  • Other fees: None
  • Fast Approvals and No Prepayment Fees, a couple reasons why over 500,000 people have gotten personal loans through Avant. Loan amounts range from $1,000 to $35,000.

    Max loan amount:
    $35000
    Min Credit Score:
    580
    Age:
    18 years
    A good personal loan:
  • No prepayment fee
  • Origination fee: 0.95% – 3.75% of loan amount
  • Late fee: Varies by state
  • No fee for paying by check
  • Unsuccessful payment fee: $15
  • Other fees: None
  • Fill out a 5-minute application and have funds directly deposited into your checking account as early as the next day.

    Max loan amount:
    $25000
    Min Credit Score:
    600
    Age:
    18 years
    A good personal loan:
  • Ideal for borrowers with average credit who want to complete the process online
  • Origination fee: Varies, but typically 5% of loan amount
  • Late fees: Varies by state
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