Are you in need of a chunk of money quickly? Whether you are trying to finance your honeymoon or are paying for surgery, you may want to look into personal loans. These loans can handle significant expenses with lower interest rates compared to most credit cards.
You can pay off a personal loan in fixed monthly installments, so you know how much time you have to pay it off and how much you need to pay every month.
This article will run you through everything you need to know about personal loans and how you can get them.
Getting a Personal Loan
You can get a personal loan from banks, credit unions, and online lenders. These personal loans have some differences such as:
- Banks: These are some of the better places to start, especially if you already have a good relationship with your bank. They typically charge higher interest rates than credit unions and online lenders and have stricter credit standards. However, if you have good credit and would like to visit your lender in person, a bank may be the best option.
Banks also offer the flexibility of paying online, by check, or in person for your loans.
- Credit Unions: These are non-profit financial institutions that serve their members, whether an association of teachers, other professionals, or a group of people who live in a specific area.
They typically offer lower interest rates and have less stringent credit requirements, so it’s easier for you to get a personal loan at a credit union even if you have less-than-perfect credit.
The downside of a credit union is that you need to be a member before applying for a personal loan. You will need to open an account and deposit a minimum amount every month.
- Online Lenders: These are lenders without physical branches you can visit, which means they operate with less overhead cost and can offer lower interest rates. Some online lenders cater to people with poor credit, so you can go for these lenders if you have trouble applying for a personal loan anywhere else.
Choosing a Loan Term Length
It is important to note that the loan term length can significantly affect the overall price of your loan. Your term length is the amount of time you must pay back the loan, usually ranging from 12 to 60 months. Some lenders may offer longer terms which means lower monthly payments, but these may also mean higher interest costs in the long run.
It is best to look into the shortest loan term you can afford to keep the cost of the loan as low as possible.
Other Terms to Consider
Other factors can affect the cost of your loan, such as:
- Interest Rate: Also indicated as annual percentage rate (APR), this is the interest inclusive of your loan’s additional fees and costs. It would be best if you went for the lowest APR you can find.
- Fees: Other than the interest, your lender usually charges maintenance and administrative fees for each loan.
- Funding Time: This is how long the loan will be processed. Banks and credit unions usually take longer to process and disburse loans, while online lenders can often offer same-day deposits.
A personal loan can come in handy if you need money for a significant, time-sensitive expense. Unlike credit card and payday loans, you can pay these back in installments, which means flexibility in terms of your personal cash flow and timing.
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