At Loanza, we can help you find a personal loan, whatever the reason!">
There are all kinds of reasons for personal loans. Multiple lenders may offer personal loans to all kinds of people who qualify according to their credit scores. You could use a personal loan for all manner of reasons, too.
Let's begin this guide by looking at the top reasons why people get a personal loan. We'll then cover some other popular questions and topics that arise whenever people look for loans like these.
Are you thinking it might be wise to get a personal loan? Most personal loans may be requested for one of the following reasons. There are others, sure, but these cover the top reasons lots of people begin looking for this type of loan.
Debt consolidation is the process of taking out a personal loan big enough to repay all your outstanding debts. You're consolidating debt into one loan rather than having several outstanding debts to make repayments on. Examples include other high interest debts such as multiple credit cards and store cards, along with outstanding payday loans.
Make sure you look at your figures before you consolidate debt like this. You may be able to use borrowed money via a personal loan to clear all those, getting rid of high interest debt and replacing it with lower interest rates.
You'll also replace several repayments with one per month. Many people find this easier to manage, as it reduces the chances of forgetting to pay one or two of them and incurring fees as a result.
Is this the same as the previous reason? Not quite... it may simply mean you have credit card debt that is expensive to repay, rather than having lots of loans with unmanageable monthly payments.
If you have existing debts on a credit card, you may have trouble meeting the minimum monthly payment on that card. Interest rates may be higher than those for a personal loan too.
So, if you could take out a personal loan on a fixed monthly payment, chances are the interest rates might be lower than those offered by your credit card issuer. Therefore, personal loan offers could help you save money and clear your debt.
This won't be the right choice for everyone, but if you have student loans, you may find that a personal loan could come with a lower interest rate. Compare personal loan details with those for your student loan(s) to check terms, interest rates, and more.
And as with all loan possibilities, check up on the details for your current loan to find out whether any alternative may be better for you. Reading the small print isn't the most exciting thing to do, but it does get you into a more knowledgeable position.
Auto loans can be a good way of financing a car purchase. However, personal loans could have lower interest rates than auto loans. Vehicle financing could be pricey, but if you are thinking of borrowing money to clear car loans, make sure there are no penalties for clearing that debt.
Read the loan terms for your existing loan and for the personal loan you're thinking of requesting to get the lump sum to pay it off.
Some debts result from unexpected expenses - and medical bills certainly qualify as an emergency expense. Medical costs can potentially reach thousands of dollars. Few would have enough in their savings account to meet those emergency expenses.
In this case, a personal loan could potentially be a way to meet the bills and repay the amount spread over several months or years.
What is a major purchase? A large purchase could be something for the home, maybe something essential like a refrigerator or washer drier. Basically, anything expensive you may require a payment plan to afford.
While some sellers offer people the chance to pay in instalments, you may find that a personal loan could be a more affordable way to manage your monthly payments for the item in question.
While some couples rely on a family member such as a parent to help fund their nuptials, others take out a single loan amount to pay for the costs associated with a wedding.
Even if you make solid financial decisions and keep costs down, you may still want to take out a personal loan to borrow money for this event. Wedding loans are becoming more popular and there are plenty of possibilities out there that may prove worthwhile if you're planning the big event in a few months' time.
Do you have a home improvement project in mind? A personal loan may help you fund it. It could cover an extension, new kitchen, new bathroom, or just a series of improvements throughout your home.
If you own your property, you could consider secured loans that require collateral. Typically, unsecured loans may have higher interest percentages when you compare average APR figures, so bear that in mind.
For a larger purchase such as an extension, you may consider a home equity loan that releases some of the equity held in your property (if you have built some up). Be sure to read up on home equity loans first, so you can see how they differ from personal loans. Don't assume one is automatically better than the other, as we're all different and a personal loan could make more sense in some cases.
Sometimes home improvement isn't enough, and it is better to move rather than make changes to your current home. Moving costs can quickly add up, and we don't all have an emergency fund big enough to deal with them.
You could look for an unsecured personal loan with affordable monthly installments to help with this financial situation. Once you've added all the removal fees and other costs together, they can really go higher than you think.
It's easy to get a copy of your credit report online. Once you have it, you can see where you stand and what your current credit score is. If you have poor credit, you're likely to pay higher rates for any loan you request. Those with a better credit history may be able to take out a personal loan with a more affordable interest rate.
There are several brackets that your credit score may fall into. These go from poor to excellent, so the better your credit score, the more chance there is that you might be able to find a competitive personal loan.
Secured loans and unsecured loans... what's the difference and how do these personal loans work?
Most lenders may offer both types of personal loans. The secured type is the way it sounds - secured on something worth the same as or more than the value of the loan. This would usually be a property or sometimes a vehicle, in the case of auto personal loans. However, it does mean that you risk losing your home or vehicle should you find you cannot make the regular repayments on the loan.
In contrast, unsecured loans have no such backup to support them. This means that lenders are taking a bigger risk in lending to someone, as they have nothing to secure the loan to for support in case something goes wrong.
That's the reason why unsecured personal loans usually have a higher interest rate, to reflect the increased risk. If you are looking for a lower interest rate and you do have something you can put up as collateral for the loan, this may be a sensible route to take.
Whenever you see a loan advertised by online lenders - or a loan brought to you by using our online service - you'll see an interest rate next to it. Exact rates vary according to all manner of scenarios and factors. You'll usually have a rough idea of what to expect, but the exact rate is determined by your credit score, history, the amount you'd like to borrow, and how long your repayment terms are for.
However, you may get the chance to consider fixed and variable rates in either case. Each has its advantages, and one may prove to be a better option than the other. No one wants to pay high interest rates if they can help it, so let's weigh up the two possibilities to see how they work.
If a personal loan has a fixed rate of interest, it means you'll always be charged interest according to that rate. There is no danger of it going up - and it won't go down either.
If you're on a tight budget for repaying your personal loan and you'd like the reassurance and certainty that the monthly payment going out of your bank account will never change, this could be the better option for you.
Variable rates are just that - they could potentially go down if the base rate drops, but they may also go up if the base rate goes higher. They tend to be lower across the board than fixed rates, but you're sacrificing the certainty that comes with knowing exactly what your monthly payment is going to be each month.
If rates are historically at low levels when you're looking at personal loan possibilities, you may prefer the security of a fixed rate deal. Think carefully before you choose a variable option, as you could find your low rate suddenly increases at some point in your personal loan term.
It's crucial to recognize the difference between one type of personal loan and another. A payday loan works very differently from regular personal loans.
For starters, there are no monthly payments to make. While personal loans require multiple monthly payments, a payday loan is repaid with just one payment. This means they may not be the best way for borrowing money if you're looking to fund a significant purchase or you need a larger sum for other reasons.
For example, let's say you've incurred medical expenses reaching into thousands of dollars. Unless you get paid many thousands of dollars per month - not the case for most people - a payday loan wouldn't fit the circumstances. Instead, you may wish to look for a personal loan you can spread over many months to get an affordable repayment each month.
With payday loans, you can only ever borrow a portion of your monthly income for the month you take out that loan. This makes them worth thinking about when you have a smaller bill to pay, or maybe a small purchase that cannot wait until payday for some reason. It's an extremely short-term debt rather than something lasting for a longer period, and should therefore be viewed as such.
Whether you're looking for a personal loan for debt consolidation, emergency expenses, or anything else, we may be able to help connect you with a suitable lender. With over 50 lenders in our online network, we have helped many thousands of customers find competitive lending options that work for them.
No matter why you're looking for a loan, we know that you want competitive terms, rates, and offers. That's something we might be able to help you with. Complete our simple online form today and let us do the heavy lifting of finding you a personal loan. You can review the details online at your convenience and there's never any hard sell or requirement to take out a loan if you decide not to go ahead. You're in control, so make sure you get the most out of our online service today and see if we could spot the loan you're looking for.