Taking out a loan can be decision with long term ramifications, and demands a borrower’s full attention to the whole process. Loans can be an extremely useful and effective tool when properly managed...
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Two good questions for the financially-astute. To begin with, a personal loan, often referred to as an unsecured loan, is an amount of money loaned to an individual by a lender that requires no collateral. This is as opposed to other types of loans such as a mortgage or car loans that use the item in question to secure the loan repayments.
Once a last resort for those in desperate straits, personal loans have been slowly making a comeback. Today, millions of people take out personal loans because the terms are better, the rates are competitive, the options are numerous, and surprisingly enough, personal loans often help borrowers improve their credit ratings. So, the modern day borrower’s question is no longer, do I have any other option, but rather, is a personal loan a good option for me. Here are a few things to take into consideration when weighing your options.
The APR on personal loans will vary depending on your lender but the APR on these loans is lower than what you would typically receive from a payday or short-term loan – usually between 10% and 35%. These loans can be a good alternative to payday loans because they are less expensive than credit cards and as mentioned previously, the APR is lower than it is on payday loans. It is not ideal to owe any money but if you require a loan, then a personal loan could certainly be a viable option.
Representative example: assuming a loan of $10,000 over 60 months at a fixed rate of 3.1% per annum and fees of $60.00. This would result in a representative rate of 3.3% APR, with monthly repayments of $180.80, for a total amount paid of $10,848.00.
*Your APR may differ based on loan purpose, amount, term, and your credit profile. Rate is quoted with AutoPay discount, which is only available when you select AutoPay prior to loan funding. Rates under the invoicing option are 0.50% higher. Subject to credit approval. Conditions and limitations apply. Advertised rates and terms are subject to change without notice.
Payment example: Monthly payments for a $10,000 loan at 4.99% APR with a term of 3 years would result in 36 monthly payments of $299.66.
Same-Day Funding Disclosure:
† You can fund your loan today if today is a banking business day, your application is approved, and you complete the following steps by 2:30 p.m. Eastern time: (1) review and electronically sign your loan agreement; (2) provide us with your funding preferences and relevant banking information; and (3) complete the final verification process.
Lenders and other financial institutions will frequently look at your credit history to gauge whether or not you are a good investment. Someone with no credit history actually looks worse than someone who has borrowed money and paid it off responsibly. Paying off debt in a timely fashion can show investors that you are responsible when it comes to your handling of money, actually increasing your credit status.
The LendingTree, a popular loan marketplace that helps pair up lenders with borrowers that fit their criteria, says it best with its catchphrase: “When banks compete, you win.” The idea behind this catchy slogan is simple: competition is good for consumers because it drives down the baseline price. Just like if you have 3 stores vying for your business, they will each try to undersell the other, so you walk away with the best price for the item you are shopping for. Lenders are the same. With so much competition out there today, investors are actually making it easier than ever for borrowers to secure personal loans with excellent terms. And, there’s plenty of competition out there, so shop around for the best rates possible.
While many lenders have a section on their application form for purpose of loan, most won’t care or even ask what you are using the money for. In fact, people take out personal loans for any number of reasons, some of which include:
Are you hosting a wedding or marrying off one of your kids? Are you running a corporate event, fundraiser, or other significant affair that requires a lot of purchasing power upfront? Whatever the occasion, you are going to need a lot of upfront cash or credit to secure a venue, refreshments, and entertainment for the event. A personal loan gives you access to a large cash flow without any strings attached, questions asked, or limitations dictating your spending.
One of the most common uses for a personal loan is to make a significant purchase you couldn’t afford with a single month’s salary. This might be a new car, a boat, a house, or a pony. Whatever the high ticket item, a personal loan gives you the quick cash advance you need to make the purchase and lets you pay out the full sum over time, allowing you to enjoy your new acquisition while you do.
Sometimes, the unexpected happens. It might be an unfortunate medical expense or accident, or something pleasant such as an impromptu anniversary trip around the world. Whatever it is, a personal loan can help fund things that come up at the last minute, so there's no need to worry about coming up short when you need the funds the most.
Possibly the most common reason for taking out a personal loan is to help consolidate debt. Now, you might be asking yourself, how does taking out more money help you minimize the debt you already have. That’s a good question, and the answer isn’t that surprising. Often people have debt of various types that keeps climbing because of exorbitant interest rates. People are barely able to keep up with the monthly payments themselves, and then the interest hits them, toppling any advancements they’ve been trying to make with their payments.
The way debt consolidation helps borrowers like these is by combining all the monthly payments into one account with a significantly lower interest rate. So, not only are you now dealing with a single payment (as opposed to juggling four or five unmanageable ones), but you also get the benefit of a lower interest rate, so your debt doesn’t keep climbing while you’re making payments. This is a major help for anyone drowning in credit card debt.
Basically, you can use your personal loan for anything you’d like.
If you’ve been looking into personal loans, you’ve likely come across the terms unsecured and secured loans. The difference is simple: secured loans require some form of collateral to secure the loan, while unsecured loans do not. As with the example given above, when you take out a mortgage loan, the house you are buying serves as the collateral for your loan. If you cannot make the payments (and are unable to work something out with the lender in control of your loan), then the lender has the right to foreclose on the house, taking that in lieu of the monthly payment you owe.
Alternatively, unsecured loans require no such deposit. While there will be consequences for not paying your monthly required debt amount, nobody is going to come collect your wedding dress or purchased items because you missed a payment. While you will, on occasion, find the rare secured option, the vast majority of personal loans are unsecured loans.
While personal loans is a general category, there are actually several different types of financial options that fall under this larger umbrella term. A personal loan can range from a mere $500 that you need just to get through a tight spot one month, up to $100,000 for the major expenses we listed above. Regardless of how large or small the amount is, they all fall under this general categorization. Some of the more traditional types of personal loans people take out include:
Probably the most important factor when looking into loans is how much interest the lender is charging. Interest adds a significant amount to your overall repayment terms, and every percentage increase changes the outcome dramatically. For example, if you choose to take a loan out for $10,000 with an interest rate of 5%, you’ll end up paying $10,500 over time. If you get an interest rate of 10% though, you’ll be paying $11,000. And, the amount increases as you go. So, when you look into personal loans, be sure to pay close attention to the interest rates being offered.
Before we explain how autopay can help you reduce your APR, let’s define both those terms. Autopay is a payment system that you can set up so that your monthly loan installments are paid automatically. Most people will tie their monthly loan payments to a bank account, so the payment instantly goes out on the pre-defined repayment day each month. Neat and simple.
APR is an acronym for annual percentage rate. It is the sum total of charges, fees, and payments you’ll make on your loan each year. The APR represents how much you are going to pay each year, so the lower the APR, the less you are going to pay in the long run. Lenders will generally list their APR for your prospective loan next to other loan terms like interest rates, loan repayment contract length, amongst other details.
Following so far? Ok, now that you understand both terms, what does autopay have to do with APRs? This is the part you are going to like. Many lenders will offer borrowers a lower APR just for signing up with autopay. Why? Because autopay ensures that you won’t miss a payment or be late for your monthly expense simply because you were negligent or didn’t realize what day of the month it was. It’s sort of a guarantee that the lender will get paid back in a more timely, efficient manner. And, for this type of responsibility and efficiency, lenders are willing to reward you, so take advantage of the benefits.
Personal loans are changing the lives of millions of people every day, opening new windows of opportunity and financial relief where none existed possible before. Now that you know the basics of this fundamental financial resource, here are some of the best names in the industry for securing a personal loan for yourself.
SoFi stands for Social Finance and it began by helping students drowning in debt get loans. The institution has since expanded, offering mortgages, personal loans to pay off expenses—such as credit card debt—and wealth management services. The following are some of the key points about SoFi that can help you determine if they fit your needs:
Visit the unabridged SoFi review to learn more about this top notch loan provider.
LendingTree is not a direct lender, it is a whole marketplace of reliable lenders competing for your business by offering you the best rates possible. Potential borrowers fill out a pre-approval form for Lending Tree, which then sends them a list of lenders that fit their needs. As a borrower, you can choose the lender with the most beneficial loan terms. Here are some of the highlights of LendingTree:
Visit the full LendingTree review to learn more about this notable loan provider.
Discover is well-known as one of the biggest credit card brands in the US and it has successfully transitioned into personal loans as well. It caters to those with good to excellent credit. Qualified borrowers can get a loan decision the same day they apply, and they can have the funds sent to their account by the following business day. Below are some key facts about Discover:
Visit the extended Discover review to learn more about this leading loan provider.
You may experience a moment in your life when you need to borrow money. A personal loan can be a great way to quickly get the finances you need, but make sure you do your homework before signing an offer. Keep in mind that with a personal loan, you can expect to pay much higher interest rates, with a short period to repay the funds. Armed with this knowledge, read from our list of expert-reviewed lenders to find the best personal loan for your needs.