Discover Your Options: Personal Loans
Do you need a loan for home improvement, car repairs, paying rent, or any other personal expense? Whether you’re seeking out auto loans, home renovation financing, or just need to make ends meet, personal loans might fit your needs.
For one thing, personal loans—while offered by traditional financial institutions—tend to be provided through innovative online platforms. This new form of consumer lending is more favorable to applicants with lower incomes and lower credit scores.
Note that not all personal loans are made the same. There are a multitude of factors that contribute to the ideal personal loan. These include annual percentage rate, loan terms and conditions, prepayment penalties, required credit history, and prepayment penalties that you’ll need to consider.
Let’s take a closer look at personal loans:
Get the Best Rates for a Personal Loan
The average APR of personal loans in the US hovers around 9.5%. More specifically, unsecured personal loans tend to be higher (up to 36%) because you don’t have to provide collateral.
Your path to help get the funding you need.
While most personal loans are unsecured, they can be secured, wherein the rates are much more favorable. Qualifying for this more favorable loan (which will boast the lowest rate) requires considerable collateral, such as your vehicle or home.
Benefits of a Personal Loan
First and foremost, while personal loans’ APR range is relatively high, it’s far more affordable than that of credit cards.
Furthermore, there’s optimal versatility. You can spend your consumer loan on any need—even for consolidating existing debt. Whereas auto loans, mortgages, student loans, etc. must be dedicated to one specific purpose.
Speaking more to personal loans’ versatile nature is how there are options with and without origination fees (up-front costs), depending on your needs. Since many unsecured personal loans are available online, bad credit borrowers have a favorable option which keeps them safe from predatory payday lenders.
Lastly, personal loan payments are usually in monthly installments with a fixed interest rate. Meaning, there are no surprises, and you can plan your budget accordingly.
Personal Loans FAQ
Read on, as the wizards behind MoneyWizard.co provide answers to some questions that we’re frequently asked about personal loans:
What is a Personal Loan ?
These loans are fixed in the following three ways:
- Fixed amount of money borrowed
- Fixed annual percentage rate
- Repaid over a fixed length of time
The funds from such loans can be for any personal purpose, unlike many other loans that can strictly be used for one purpose.
How do I apply for a Personal Loan ?
Whether you’re applying with a more traditional financial institution, credit union, or online lending company, you need to fill out an application.
You must often provide an array of personal information, such as pay stubs and ID/verification. From there, the lender will assess your credit score and history.
Once approved, depending on the source, you can close your loan. Many online personal lenders only take a business day to approve your application. Plus, it won’t take much longer to receive your money, with many companies trying to supply borrowers with funds in a day or two.
What do you need to apply for a Personal Loan
Here’s a list of items you’ll need for your personal loan application:
- Valid identification (Driver’s license, passport, state-issued ID, certificate of citizenship, birth certificate, military ID)
- Employer and income verification
- Proof of address
Why do Personal Loans have higher interest?
Many companies offer personal loans at higher interest rates because they’re usually unsecured, meaning they don’t require collateral. As to make up much of the difference, the borrowing cost is increased.
Can I refinance my Personal Loan ?
You can refinance a personal loan by borrowing more money for debt consolidation.
Provided you find a personal lender specializing in refinancing and debt consolidation, you can benefit from a more favorable interest rate and loan terms.
How large can a Personal Loan be?
While some lenders will allow some loan candidates to borrow up to $100,000, that’s a luxury mostly available to high-income applicants with excellent credit. The general ceiling for personal loans is around $50,000. Whereas the minimum amount can drop below $500. However, most lenders won’t drop below $1,500.
Do Personal Loans hurt your credit?
This is something of a loaded question. At first, applying for a personal loan will negatively affect your credit score. But the story doesn’t end there. After all, people commonly take out personal loans to improve their credit over the long haul. If you pay in the agreed-upon fixed amounts on time, your personal loan can do wonders for your credit.
