What is a Personal Loan?
A personal loan is a small amount of money that you borrow from a bank or lending institution. It is only for personal use and not to buy something that has a high value. The personal loan will have a fixed interest rate and must be paid back in a set number of months.
How Much Money Can I Borrow?
Loan amounts can be as low as $500 and as high as $100,000. The personal loan amount will depend on your income and expenses. It is recommended that you borrow only as much as you need. The lender will look at how much money you are bringing in each month and several other factors to ensure that you can pay back the personal loan.
Types of Personal Loans
- Secured Loans
- Unsecured Loans
- Co-Signed Loans
- Personal Line of Credit
This personal loan is backed by something of value that the borrower owns. This could be an automobile, a piece of real estate, or another asset.
This Loan is not backed by collateral or something of value. Personal loans without collateral are harder to obtain and will have a higher interest rate.
Are personal loans where the borrower has someone else co-sign for them. For example, if you need a personal loan but your credit history is poor and you do not qualify, a family member or friend could co-sign for the personal loan to help you.
Personal Line of Credit
A personal financing account that allows the borrower to borrow money up to their personal line of credit agreement. This type of personal loan is best for people who want to build credit. For example, a personal line of credit is like a credit card but with no pre-set spending limit.
When Should I Get a Personal Loan?
The number reason to get a personal loan is when it is your least expensive borrowing option. Here are reasons that a personal loan makes sense.
- Current credit limits do not match borrowing needs.
- No collateral to offer.
- No current low-interest credit cards.
- Using the personal loan to pay off higher-interest debts to save money.
Choosing The Right Lender
1. Never Take the First Offer: Remember that taking the first offer can be tricky sometimes! You will get to see many offers in the market, but it is advised to take time and check out all of them carefully. The best way to go about things is by making a list of lenders operating in your area and shortlisting them to three to four options. Then choose the best offer according to your preference.
2. Allot Adequate Time for Research: It is advised that you allow at least around thirty days for doing your homework properly. This gives enough time for visiting every possible lender, checking out their offers, and then finalizing on one which appeals to you the most.
3. Avoid Brokers as Much as Possible: Brokers are good to a certain extent, but it is still better that you avoid them wherever possible. They charge a hefty fee for their services and will try to convince you of going with the first option which comes your way.
4. Look Out for Hidden Charges: Almost every lender will ask you to pay a certain processing fee. Moreover, there might be additional charges in terms of taxes and other costs which you have to bear in the initial years itself. So always look out for such charges before finalizing on a lender.
5. Check The Companies History: It is advised that you go through the entire history of an organization before opting for them. A good history will have nothing but appreciation letters, testimonials, and several other positive reviews without any complaints.
Personal loans are personal financing that can help with a variety of personal needs. From consolidating debt to paying for emergencies, personal loans offer people an alternative to credit cards or high-interest rates on money borrowed from friends and family members. If you're looking for the best personal loan provider, look no further than our recommended providers.
* Personal Loans Rate and Terms Disclosure: Rates for personal loans provided by lenders on the Credible platform range between 4.60% - 35.99% APR with terms from 12 to 84 months. Rates presented include lender discounts for enrolling in autopay and loyalty programs, where applicable. Actual rates may be different from the rates advertised and/or shown and will be based on the lender’s eligibility criteria, which include factors such as credit score, loan amount, loan term, credit usage and history, and vary based on loan purpose. The lowest rates available typically require excellent credit, and for some lenders, may be reserved for specific loan purposes and/or shorter loan terms. The origination fee charged by the lenders on our platform ranges from 0% to 12%. Each lender has their own qualification criteria with respect to their autopay and loyalty discounts (e.g., some lenders require the borrower to elect autopay prior to loan funding in order to qualify for the autopay discount). All rates are determined by the lender and must be agreed upon between the borrower and the borrower’s chosen lender. For a loan of $10,000 with a three year repayment period, an interest rate of 7.99%, a $350 origination fee and an APR of 11.51%, the borrower will receive $9,650 at the time of loan funding and will make 36 monthly payments of $313.32. Assuming all on-time payments, and full performance of all terms and conditions of the loan contract and any discount programs enrolled in included in the APR/interest rate throughout the life of the loan, the borrower will pay a total of $11,279.43. As of March 3, 2022, none of the lenders on our platform require a down payment nor do they charge any prepayment penalties.
Prequalified rates are based on the information you provide and a soft credit inquiry. Receiving prequalified rates does not guarantee that the Lender will extend you an offer of credit. You are not yet approved for a loan or a specific rate. All credit decisions, including loan approval, if any, are determined by Lenders, in their sole discretion. Lenders will conduct a hard credit pull when you submit your application. Hard credit pulls will have an impact on your credit score. Lowest rate advertised is not available for all loan sizes, types, or purposes, and assumes a very well qualified borrower with an excellent credit profile.