Get The Most Out Of A Personal Loan
Personal loans are loans you can use for any purpose — a new computer or a flat screen TV, car repairs, vacation and much more. Personal loans are unsecured loans, which means that there’s no “collateral” or property you are offering the lender as security that you’ll repay the loan. Since personal loans are unsecured, lenders typically charge higher interest rates. Since personal loans tend to have higher rates than other types of credit – such as HELOCs or credit cards – it’s easy to see why relatively few people turn to personal loans today.
Still, this type of credit is readily available from banks and credit unions, and personal loans can make sense for major purchases or emergencies.
Reasons to apply for personal loans:
- Personal loans are a one-time loan with a fixed repayment schedule. Once you pay off the balance, you’re not tempted to re-use again (unlike credit cards)
- You need additional funds, but don’t own a home or have enough available in your home equity.
Personal loans: Some general tips on how to shop
- Decide how much money you really need and whether you have a potentially less expensive alternative to a personal loan (such as a HELOC or home equity loan).
- Explore rates and compare terms from as many personal loan sources as possible: your credit union, bank or local finance company. Avoid “payday” lenders, who charge hefty rates for personal loans.
- Compare total costs and read the contract. Personal loans can have hidden charges, such as credit insurance. Don’t just look for the lowest monthly payment, but the total expense and rules for repaying your personal loan.
- Don’t borrow more than what you bargained for, even if you’re offered a larger personal loan than you requested. Protecting your good credit history is important, so don’t bite off a bigger personal loan than you can chew!
