Here Are The Top Nine Reasons To Get A Personal Loan, Debt Consolidation. Debt consolidation is one of the most common reasons to apply for a personal loan. Even with an unsecured personal loan, of course, not making payments on time can be detrimental to your credit rating and severely limit your ability to get credit in the future. FICO, the company behind the most widely used credit score, says its payment history is the most important factor in its formula, accounting for 35% of its credit score.
You can also consider a personal loan if you need to take out a loan for a fairly short and well-defined period of time. Personal loans usually last 12 to 60 months. For example, if you are owed a lump sum of money in two years, but in the meantime you don't have enough cash flow, a two-year personal loan could be a way to close that gap. If you owe a substantial balance on one or more high-interest credit cards, taking out a personal loan to pay them off could save you money.
For example, as of this writing, the average interest rate on a credit card is 19.49%, while the average rate on a personal loan is 9.41%. That difference should allow you to pay the balance faster and pay less interest in total. In addition, it is easier to track a single debt obligation and pay it off rather than several. A personal loan can be used as a form of debt consolidation, especially with credit card debt.
It's also a popular reason people apply for a personal loan. Personal loans charge lower interest rates compared to credit cards, especially if you have good credit. The best personal loans charge an interest rate as low as 4%, well below the double-digit percentages that most credit cards charge. You can apply for a personal loan, pay off your outstanding credit card balance, and then make a payment to your new personal loan servicer.
If you move close to where you live now, you may not need to cover any major expenses. But if you're moving out of state, you may need extra money to pay for moving costs. Moving far away means covering the cost of packing your belongings, possibly hiring removals and transporting your things to your new location. When you apply for a personal loan, you complete an application with a bank, credit union or online lender.
If approved, you can borrow a sum of money that you return for a set period of time. You will pay interest and can use the funds as you see fit. The list of common purposes for a personal loan includes financing a large purchase, covering an emergency expense, and consolidating debt. Personal loans, which are usually unsecured, are repaid in monthly installments with interest.
Most lenders will look at your creditworthiness and other factors to determine your interest rate. You should always evaluate the purpose of a loan to determine if you need to take out a loan and if you have the ability to make payments. Before you start applying for personal loans, it's important that you know your credit score to make sure you can qualify. Most personal loan lenders are looking for applicants who have a good credit score, particularly online banks.
However, if you already have a relationship with a bank, you may be approved for a favorable settlement if you have a good history of paying bills on time and meeting the terms of your previous loans and accounts. Your score may fall back slightly after your personal loan has been issued to you, but your score will recover quickly as long as you keep up with your payments. While you can use a personal loan for almost anything you want, most lenders have some restrictions and may ask you on your loan application what you plan to use the money for to make sure you won't use it for a prohibited reason. A personal loan could allow you to get the treatment you need promptly and pay your medical expenses over time.
When you apply for a personal loan, lenders usually conduct a thorough investigation into your credit report to review your credit history and verify your credit score. As with virtually all types of personal credit, personal loan lenders reserve their lowest interest rates for people with excellent credit scores. However, if you are still wondering what personal loans are used for, here are nine of the most common reasons people get a personal loan. While a personal loan may be a good option if you need extra money for a specific purpose, there are many factors to consider before deciding what type of credit is best for your situation.
One of the benefits of getting a personal loan is that they're usually unsecured, meaning they aren't backed by assets like your house or car. Here are some suggestions on when it makes sense to apply for a personal loan and some cases where a personal loan is probably not your best option. Because it is not secured by the property that the lender could garnish if you don't repay the loan, the lender is taking a greater risk and will most likely charge you a higher interest rate than it would on a mortgage or car loan. If quick access to money is important to your situation, make sure you select lenders with fast delivery.
There are many good reasons to apply for a personal loan, such as consolidating expensive credit card balances and financing weddings or one-time trips, but they are often more useful for less holiday events, such as emergency home repairs or medical expenses. When you apply for a personal loan, you have the opportunity to choose the repayment plan that best suits your income and cash flow level. . .