Personal loans are sums of money borrowed that can be used for a variety of purposes such as large purchases, debt consolidation, emergency expenses, and so on. These loans are repaid in monthly installments over a period of a few months to a few years. It may take longer depending on your circumstances and how timely you make payments.
Before taking out a personal loan, you may want to try something else, such as making a small purchase or negotiating a lower price or cost. Here are the top nine reasons to get a personal loan, as well as when they are appropriate.
- Debt consolidation
- Alternative to a payday loan
- Home remodeling
- Moving costs
- Emergency expenses
- Appliance purchases
- Vehicle financing
- Wedding expenses
- Vacation costs
How to get a personal loan?
If you need a personal loan, you should shop around for the best interest rate. Begin by applying to your current bank, then to online lenders, local credit unions, and other banks. Most lenders will let you get prequalified, which will allow you to see your potential interest rates and terms before you apply, all without a hard inquiry on your credit report. In addition to interest rates, you should compare loan terms and fees.
When you’ve found a lender you like, you’ll submit a full application with your loan information, personal information, and income verification documents. A hard inquiry will be placed on your credit report as a result of this. Most lenders consider this part of the process to be quick; if you submit all relevant documents, you may be able to receive your funds in a matter of days.
How to tell if a personal loan is right for you?
A personal loan may be a good option if you require a quick infusion of cash to cover unexpected expenses. Personal loan interest rates are typically lower than credit card interest rates, especially if you have an excellent credit score.
Of course, you should always balance the benefits and drawbacks. After all, taking out a personal loan entails incurring debt, and you must be prepared to make payments on that debt for a number of years. If you don’t have a monthly budget for principal and interest, you should reconsider the amount you need to borrow or the way you borrow.