It can happen so easily. All it takes are some unexpected expenses and/or poor planning – too many meals out, a dental emergency, a new job that requires an upgraded wardrobe – and you find yourself with far more credit card debt than you ever imagined.
Or perhaps you’re looking ahead to a life event that is going to cost more than you can save in time. Maybe you’re planning a long-distance move (note: this means less sex) or you need fertility treatments that aren’t covered by insurance.
Many people don’t realize that personal loans are available to cover these kinds of debt and expenses. Just as you would take a loan to buy a car or house, you can borrow money to cover just about anything with a personal loan. Depending on the company, loan amounts can range from $1,000 all the way up to $100,000. And personal loan repayment terms range from one to seven years. Interest rates depend largely on your credit rating and whether or not you take a secured or unsecured personal loan.
Secured Personal Loans
Secured personal loans require that you provide some kind of collateral (most commonly your car, but also sometimes your savings). That makes it lower risk for the lender – since it will get something of value if you default – so interest rates tend to be lower. Of course, that also makes it higher risk for you, the borrower, since you could potentially lose something of value.
Unsecured Personal Loans
Unsecured personal loans don’t require any form of collateral. These are more common than secured loans, but they typically require excellent credit ratings since they carry greater risk for the lender. Lenders also look at your debt to income ratio to determine if you’re a good candidate for a personal loan. Unsecured personal loans most often have higher interest rates, in comparison to secured personal loans.
Why should you take a personal loan?
One of the most common reasons for taking a personal loan is to consolidate credit card debt. If you are paying off multiple credit cards, which typically charge high interest rates, it can make sense to take a personal loan to pay those all off at once. This is only worthwhile, of course, if you can get a lower interest rate than you’re currently paying on your cards. If you can find that, you stand to save a great deal of money.
In addition, taking a personal loan to pay off credit card debt can help improve your credit rating. Borrowers who use all or most of the available credit on their cards take a hit in their credit rating. Personal loans, on the other hand, are installment loans, which have a higher standing than credit card debt.
But that’s not the only reason you might choose to take a personal loan. Perhaps you have a once-in-a-lifetime travel opportunity. Or you want to invest in home improvements – perhaps energy efficient systems – that will save money in the long run. Maybe you’re ready to adopt a child. Obviously living debt-free is the ideal, but life is rarely ideal. So a personal loan can be an excellent option to keep in your back pocket.
How do you find a personal loan?
Whether you choose secured or unsecured loans, there are a number of different places to find them. Traditional lenders, such as banks and credit unions, are one place to look. Or you can shop non-traditional lenders such as SoFi, Earnest, Pave, CommonBond and even Goldman Sachs which will give you a lot more options and flexibility. Either way, you should consider multiple different lenders before signing the application. There are even a variety of different personal loan comparison tools out there on the internet, which will help you make an informed choice.
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Welcome to Bargain Babe! I’m Mara, and I’m so glad you’re here. I am an obsessive bargain hunter and penny pincher, and I am determined to live a full life without EVER paying full price.
In my opinion, Make sure that you are ready for a personal loan before applying for it. Read all the required documentation carefully so you are not caught out by unexpected interest rates, fees, or fine print.
Also, Check your credit score to assess your credit worthiness. Check for any errors in your credit file that could prevent your application from being approved.
Great tips!
Hey Bargain Babe, great information all around. Personal loans are great financial vehicles when life hits (financial emergencies) but they seem to be harder to attain these days. Maybe it’s due to the pandemic but banks across the nation are requiring that borrowers have near perfect credit before they’ll even consider your application. This alone has caused an increase in the subprime market with notable products like installment loans, title loans, and payday loans.
Personal loan platforms like LendingClub and Prosper are staring to look like the future of lending as each day goes by. The banks at this point are becoming relics of the past century.
Personal loans are truly a forgotten answer for emergencies. I completely agree. They are flexible and you can find a lot of different sites that will aggregate rates for you nowadays. You used to have to call around or go into banks back in the day. Wow. A lot has changed. But, one loan product that I believe has also changed drastically this year—at least in my area—are title loans. I have seen the industry change and begin offering more straightforward loans. Obviously, the collateral is still the same, but you are seeing new companies enter the space desiring to really help people during hard times with COVID and all. I think right now you will find lower title loan amounts (which is great because it makes repayment easier), better interest rates, and more transparent contracts than ever before. The industry’s bad actors have been weeded out and some good companies are growing in the space. Again, this is my opinion based on what I see happening locally.
if you want a loan for new starting business its no bad idea but loan take always with out interest
if you have any genuine matter for personal loan so you can apply for loan..
I agree, this is very important advice. Before you take out a loan, you need to carefully study the terms of its provision and understand what obligations you take on. You should not apply for a loan if you do not have sufficient financial capacity to repay it on time, as this can lead to negative consequences such as fines, debt and bad credit history.
I think that if you are ready for a loan and are sure that you will be able to repay it in the future, then you need to take it as soon as possible, because if you distribute the money received correctly, then it can quickly recoup its cost and you will not get into a bad situation and will be calm
Really appreciate your thoughts and are very helpful for the reader thanks for sharing
Thank you for your informative post! I really enjoyed reading it and found your insights quite enlightening. If you’re interested in exploring more articles on these subjects, I invite you to visit Inforinn
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