Many consumers will benefit from obtaining a personal loan at strategic times in their life. Personal loans can provide you with thousands of dollars or more in capital that can be used for a wide range of purposes. While even those with mediocre credit scores may qualify for a personal loan, the best rates and terms as well as the highest loan amounts are reserved for those with great credit scores. If you have decided to apply for a personal loan, take time to thoroughly review the options before you proceed.
How Personal Loans Can Be Used
As a first step, you should determine what you plan to use the loan funds for. Some lenders will ask for this information, and they may even establish requirements for it. For example, if you plan to consolidate debts with the loan proceeds, they may have a requirement that proceeds are provided directly to your creditors rather than to you. Personal loans are often used to consolidate debts, but they can also be used to make home improvements, to send the kids to college or even to take a much-needed vacation. By determining how you plan to use the loan proceeds, you can more easily find a lender that offers loan sizes that meet your needs.
What to Look For When Comparing Loan Programs
Savvy consumers will spend ample time shopping around to find the best lender to work with. Personal loans are commonly offered by most banks, credit unions and other financial institutions. Some require you to pledge collateral, such as with a home equity loan. However, many offer unsecured loan programs as well. Unsecured loans often come with higher interest rates, but with a great credit score, your interest may still be reasonable. While you want to compare interest rates, you also want to compare loan amounts, terms and fees. In addition, you may also review the overall loan process time. Some loans will take a few weeks to close, and others may only take a few days. Most will publish all of this information on their website, but you may need to contact some to obtain all of the information you need.
Finding a Loan That Is Affordable for Your Budget
By reviewing the options for personal loans through online research, you likely found one or several lenders that you may want to work with. Your next step is to find a loan that is affordable for your budget. The primary components that determine your monthly loan payment are the loan term, the interest rate and the loan amount. The loan amount may remain the same, but the term and rate can vary by lender. You can use an online loan calculator to estimate monthly loan payments. Ideally, the loan payment will be very affordable for your budget. You do not want your lifestyle cramped as a result of taking on additional debt. Opting for a longer term can make your payment more affordable. However, a longer loan term generally means that you will pay more in interest charges over the life of the loan.
The Importance of Getting Firm Quotes
Keep in mind that lenders publish their best rates for the most qualified applicants. The most qualified applicant may have a superior credit rating and minimal personal debt. In addition, he or she may have a high income level. While you may be a stellar applicant for a personal loan request, you may not fully meet all requirements for the best rates available. Getting a firm quote for your personal loan from several lenders will help you to more easily identify the best lender to work with. Many lenders can use a soft pull technique to review your credit scores without damaging your credit rating. This means that your primary cost associated with getting quotes from multiple lenders relates to the time required to do so.
A personal loan is an exceptional option to consider when you would benefit from additional cash. It generally provides with you a superior rate to a credit card, and a fixed term provides you with a defined repayment schedule to better manage your debt. If you use a personal loan to consolidate high interest rate credit card debt, you may even improve your budget as a result of this effort. With many lenders to choose from, you can shop around to find the best rate and terms available for your personal lending needs.