A personal loan can be a very useful financial tool. If you have unexpected expenses or want to consolidate high-interest debt, personal loans can help you get on track financially. They are a great option for medical emergencies, unexpected car repairs, and other large expenses that you aren't prepared for. These loans are typically unsecured with fixed interest rates. With this type of loan, you will have set payments to make over a designated period of time. If you are wondering whether or not personal loans are the right option for you, here's what you should know.
Your Credit Matters
Like with other types of loans, your credit plays a major role in the terms of your personal loan and whether or not you even qualify for one. Requirements can vary significantly from lender to lender. Typically the better your credit score, the more likely you will be to qualify for a loan and the more favorable the interest rate. Typically you will need a credit score of at least 525 in order to qualify for a personal loan. If you are unable to get a personal loan, taking steps to improve your credit score can help.
Interest Rates Vary
When it comes to taking out a personal loan, getting the best interest rate possible is key. The lower the interest rate, the more money you will save over the course of your loan. Interest rates can vary significantly depending on the lender and your financial history. Interest rates on personal loans can range anywhere from 5 percent to 36 percent. If you are looking for the best rate possible, shopping around and looking at various lenders can help you find a loan that suits your needs and budget.
There May Be Fees
When looking at personal loans, you'll have to consider more than just interest rates when comparison shopping between lenders. Taking out a personal loan also means paying other fees. Origination fees are what many lenders charge when you take out a personal loan. These fees can vary anywhere from 1 percent to 8 percent of the total loan amount. You will want to take this into account before taking out a personal loan. The good news is that many lenders now offer loans with low or even no origination fees.
If you need to borrow money for an emergency or to consolidate debt, a personal loan is a great option. There are a few things to keep in mind when it comes to personal loans. First, your credit score will play a role in your interest rate and whether or not you qualify for a loan. Interest rates can vary—shopping around can help. There may also be other fees such as origination fees that you need to take into account.
To learn more about your financial options, contact local personal loan services.