Whether you’re planning a big purchase or need fast money for a sudden trip, a personal loan can help you with that. The purpose of a personal loan matters, and financial institutions won’t sponsor an illegal activity. Other than that, you can spend the money on a variety of things, including medical emergencies, marriage, home repairs, travel, and vacation. Still, if you need to fund a new business venture or you want to pay for education, there are different types of loans you can get for that. Let’s delve deeper into what personal loans are all about and whether you should apply for one.
What’s a Personal Loan?
A monthly personal loan can be used to purchase most things and cover various expenses. This type of installment loan can be as low as $250 and as high as $100,000 in some cases, depending on the bank or financial institution. You can get a personal loan from a traditional bank or use the services of a digital company. As a rule, your application will be reviewed faster, and the funds can be distributed within one business day.
Online banks cut operational costs thanks to automation and the use of AI algorithms that help boost overall financial services. That’s why you can get better interest rates and customer service that are available 24/7 without having to wait for days for your application to get approved.
Typically, credit terms vary from 2 to 7 years, depending on your credit score and the amount of money you’re borrowing. The rates can be from 6% up to 36%. As a rule, the better credit score you have, the more lucrative lending offers you can get.
How Does It Work?
Personal loans are usually easy to get because they are unsecured by collateral. Still, lenders will thoroughly investigate your financial history looking at things like your spending patterns, income, and credit score to asses whether you’re creditworthy. If you qualify for a loan, the lender will deposit the funds into your account. Alternatively, if you’re using the loan to pay for your debt, the lender can deposit the money into your creditors’ accounts.
As a rule, you will need to start repaying your personal loan in one month with fixed interest rates for the whole period of your debt. Make sure you make the payments on time – this will improve your credit score. Otherwise, missing payments may really hurt it.
What Can You Pay for Using a Personal Loan?
Personal loans can be used to cover all kinds of expenses. Whether it’s a medical emergency or a big one-time purchase, a personal loan can become a real lifesaver. Let’s look at some of the most common uses for this type of installment loan.
- Home repairs and other improvements. There comes a time when you may need a kitchen or bathroom upgrade, which can be costly to pay for in one go. There are different home improvement loan options you can apply for, so it’s best to check them out before you make the final decision.
- Vacations, weddings, and trips. Big events like weddings or important trips can drain your budget in no time. You can opt for a personal debt to cover those expenses, but make sure you plan ahead and choose the best option.
- All kinds of emergencies. Medical operations and car repairs can be needed at any time. Always make sure you look for loans with the best interest rates, or consider covering the expenses using a credit card if that’s more beneficial for you.
When Should You Consider Applying for a Personal Loan?
While you may apply for this type of loan to cover most common expenses, there are some instances when this might not be a good idea. Let’s look at the examples when you should choose a personal loan.
- You need money fast. Online lending can provide you with funds within one business day, depending on the amount of money you need. That’s why a personal loan is good for emergency situations.
- You can cover the monthly payments. A personal loan is a good option for you if you can pay out the debt on time. If you miss payments, your credit score will go down, and you may end up in a bad financial situation. Use a personal loan calculator to get a better understanding of the interest rates and the overall sum of money you’ll need to pay out each month.
- You want money without providing collateral. The majority of personal loans don’t use collateral, so you don’t need to worry about losing your car, house, or other property if you miss payments.
- The rates are really low. You should always check out other options before applying for a personal loan to see whether you’re getting the most profitable deal. Check the APR you’re offered and consider other borrowing options to see if you can get something more affordable (like peer-to-peer lending or even borrowing money from friends and family).
There are times when we need a large sum of money fast to cover a debt or make a one-time, expensive purchase. You can apply for a personal loan and get the money in one business day, depending on the amount you’re borrowing. Before you do that, you should consider APR and the interest rates. It’s always good to check other options before actually applying for a loan. Personal loans are paid out in set installments every month, and the interest rates don’t change during the life of your debt. You can use this type of loan to cover most expenses, including medical emergencies, weddings, and various purchases.