With the ever-changing guidelines surrounding credit cards and large institutions cracking down on their lending requirements, it can be tough to get the credit you need for certain life expenses and emergencies.
If you’re looking to borrow money but don’t want to borrow from friends, family, or a big bank, you might want to consider taking out a personal loan from an online lender or even a local credit union.
How Personal Loans Work
Personal loans are provided to borrowers without any collateral requirements. For this reason, they’re known as unsecured loans, and they are structured to be paid back according to a pre-determined, set payment schedule. One great benefit of a personal loan is that the interest rate is fixed upon signing the loan documents, so there won’t be any rate hike surprises down the line.
Ways to Use Personal Loans
Some of the most common uses for personal loans include home improvement expenses, medical bills, and debt consolidation. If you’re drowning in high interest debt, a personal loan can be a great way to gather those bills together and lock them at one low, fixed rate. Using a personal loan for debt consolidation can save you thousands over the term of the loan compared to what you might pay the original lenders if the debt remained at the higher interest rate.
How Much to Borrow with a Personal Loan
When lenders choose to extend personal loans, their main objective is to ensure that the borrower can repay the loan. They don’t typically care what you spend the money on, as long as you’re making your payments in full and on-time. This type of flexibility extends to the amount you can borrow as well–whereas some loans might have caps on how much a new borrower can take out at one time, personal loans can be approved for upwards of $25,000 or more.
Repayment Terms of a Personal Loan
The repayment period for personal loans can be anywhere from 6 months to 5-8 years, depending on the amount of money you borrow and how much you’re willing to commit to paying back in your future monthly payments. If you’re in need of some quick cash but know you can pay it back once your situation stabilizes, taking a personal loan out can be an easy way to bridge the financial gap. If you can pay back more than the suggested monthly payment, make sure to work that into the terms of your loan to save even more on interest over the life of the loan!
A Common Sense Approach to Personal Loans
As with any loan you secure, it is a debt you’ll be responsible for until it is paid in full. If you’re able to specifically understand the need for the loan (it’s not appropriate to use personal loans for shopping sprees or instant gratification as this is a slippery slope that could leave you in financial ruin) and truly have a plan for how you’ll pay back the money, a personal loan can be a great tool in your financial arsenal. If you’d like to read more about personal loans and the various options available, don’t miss the Clydesdale Bank personal loans guide.