11 Important Things to Consider About Personal Loans

Personal loans are often a sticky subject. Most times, you need money fast to purchase an item, or to pay off a bill. That does not leave you with a good feeling. Thus, you have come to dread consumer installment loans. I can understand that needing a loan is not always a good thing. Sometimes, a personal loan can help, but not always. Obtaining a personal loan may be a good thing if you use it properly. The key is to make smart financial decisions and use credit wisely. Continue reading to find out all the things to consider about personal loans. Understanding these 11 things helps you make smart financial decisions and keeps you from drowning.

Things to Consider about Personal Loans

As anything related to finance, personal loans are complex. But not so complex that you cannot have a high understanding of them. As a matter of fact, I cannot stress enough how important it is that you fully understand personal loans before you decide to get them. If you have absolutely no idea, you should start from the basics. And this is what we’ll do right now. Besides this, we’ll also get into some details, so you can fully understand this financial concept.

Number 1 – What Is A Personal Loan?

Since we are talking all things to consider about personal loans, it is important to truly understand personal loans. I am going to give you a basic breakdown of loans and dig in a little deeper throughout this article. A personal loan is money loaned to you by a financial institution. You promise to repay the money by making regular monthly payments for a specified amount of time. The financial institution can be a bank, credit union, online lender, or even family and friends. The amount you repay per month is static, so it typically does not change. There is interest added onto the money you borrow. That amount varies based upon your credit score.

There are typically fees associated with a personal loan. It is important that you read all the fine print and understand what you are signing. This is a contract you are binding yourself to and you should not enter it without thought and consideration. Lenders expect you to repay the loan and you give your word you will. I know it is easy to get lost in all the details of a loan agreement, but it is important that you understand it. There are implications if you do not pay the loan timely. If you do not understand your agreement, you may find yourself in default.

Number 2 – Different Types Of Personal Loans

When thinking about borrowing money, some more things to consider about personal loans are the different personal loan options. As I mentioned, there are different types of lenders. You can borrow from a personal loan finance company or online lenders. Honestly, you can borrow money from just about anyone. Always make sure you have some type of binding contract. This protects you just as much as the lender.

When you think of a personal loan, the first type that comes to mind is one from a well-known bank. Today, online banks are a huge part of lending money. In the past, online loans were for those with bad credit, but that is not the case anymore. Online loans are fast and easy. You apply and submit all documents online. You receive a response in about 24 hours. If approved, the money is in your bank account in less than a day. Interest rates tend to be a little higher, but that might be worth it to you for the ease of applying.

There are also fast cash loans and payday loans. Be careful when it comes to these types of loans. They are a quick way to get small amount of cash. They have high-interest rates and short repayment schedules. If used properly, they can help you through a time when you are hurting for cash. However, if used poorly, they can only hurt you, your financial outlook and your credit. If you do not pay them back on time, you get hit with large fees. If you know for sure you can pay the money back on time, it may be a good temporary solution. These types of loans should not be used as a permanent fix and should not be used often.

Number 3 – How Can I Get A Personal Loan?

One of the first things to consider about personal loans is which one is right for you. There are many different lenders out there, but they may not all fit your needs. It is on you to do some research. I realize this may not be how you want to spend your time, but it could save you money. There is so much information available to you online, a few searches should produce the information you need.

Remember, lenders have different fees and interest rates. If you get a loan from the first lender you come across, you could spend more money than you need. It important that you educate yourself. Banks are not going to do all the work for you, no matter how friendly they seem. Remember, they are in the business to make money. I am not trying to paint banks in a negative light, just reminding you that you need to arm yourself with information.

It is important to understand how much money you really need. Remember, this is not free money. You have to pay it back. The more money you borrow means the more money you repay. Only borrow what you need. Do not think ‘oh, it would be really nice to get a new TV’ and add that into your loan. There may be better ways to pay for a TV other than a loan on which you are paying interest. Focus on your goal for borrowing the money. Do not get sucked into thinking about all the things you want to buy.

If you’re thinking “Oh my, this process sounds incredibly daunting!”, we agree. Another thing you can do is let Loanry try to help you. We partnered up with Fiona to bring you the best lenders for your needs. All you need to do is enter your information and see whether you could be paired up with lenders which may make you an offer.

Number 4 – How Do I Apply?

Knowing how and where to apply for a loan definitely falls into the things to consider about personal loans category. Believe it, or not, this is the easiest step when it comes to personal loans. I remember a time when applying for a personal loan meant going into the bank and sitting for what seemed like hours. You had to sit in one of those uncomfortable chairs and wait for someone. You hoped that you did not see anyone you knew. Finally, someone became available and then the tedium of filling out the form, which was on paper. Then it seemed to take weeks before you got a phone call telling you if you were approved.

Thankfully, those days are long gone. Now, you can go online and fill out a loan application. Most banks, even the big ones, have the ability to apply online. They may call you and gather more information, but you probably will not have to go into the bank. If you prefer to talk to someone in person, you can still go in and handle your business. Banks are more comfortable and friendly now. So, once you are so you want to apply for a loan. After you do your research to find the right lender for you, applying for a loan can take only minutes.

Number 5 – What Role Does My Credit Play?

It always seems to come back to your credit, right? And yes, that is true. Your credit makes a difference when it comes to loans. Honestly, it makes a difference in just about everything. That is why it is important to protect it. Your credit is absolutely one of those things to consider about personal loans.

A credit score is a three-digit number that prominently appears on your credit report. Your credit report is a list of your entire credit history, including payments and credit borrowed. Any late payments you made are on your credit report. If you have not paid a bill, guess what? It is on there, too. Your credit score is an indicator to lenders. It tells them how risky it is to lend you money. It tells them how likely you are to repay money you borrow. The lower your credit score, the more of a risk you are to lenders.

It is important for you to pull your credit report to see what is on there. If there are errors, you can correct them. It also informs you what lenders know about your credit. It gives you a place to start when trying to repair your credit, or get a loan. You can get money loans for bad credit, but it may be harder. You’ll have to do more work to get a loan. You end up paying more money because your interest rate is going to be higher.

Number 6 – Interest Rates

So, about those pesky interest rates…another one of those things to consider about personal loans is interest. Sometimes, the interest rate on a loan breaks you. It can change a loan from something you can afford to something you are crazy to consider.

Stay with me while I dig deeper into interest rates. This is information that is important for you to understand. There are two types of interest, fixed and variable. A fixed rate is just that, one that is fixed and does not move. A lender calculates this type of interest based on your credit score and adds it to the principle. Interest rates can vary from 8 percent for great credit to 30 percent for poor credit.

Below I highlight the difference in numbers:

Good credit = 10 percent interest on a loan for $10,000

10 percent of $10,000 – $1,000 of interest

$10,000 (principle) + $1,000 (interest) = $11,000 loan

$11,000 divided by 36 months (repayment period) = $305.56 per month

Poor credit = 30 percent interest on a loan for $10,000

30 percent of $10,000 – $3,000 of interest

$10,000 (principle) + $3,000 (interest) = $13,000 loan

$13,000 divided by 36 months (repayment period) = $361.12 per month

Your monthly payment went up almost $60 per month simply because of your credit.

Variable interest is an interest rate that changes based on market changes. Typically, variable interest starts lower but most likely climbs higher before the end of your loan repayment. A loan with a variable rate is often reassessed every 6 months and adjusts based on the market. Sometimes, it goes down, but it often goes up. Be careful when considering a loan with a variable interest rate.

Number 7 – Fees

Other things to consider about personal loans are the fees associated with loans. Every loan has some type of fee schedule. It is important that you read all of the fine print to understand the fees. A lender must disclose all fees and penalties to you in writing. It is your responsibility to read and understand them. If you do not understand, you must ask questions until you do. It is on you to protect yourself when it comes to understanding the documents you sign.

There are a handful of fees you should expect. An application fee is something a lender charges simply for you to fill out the application and run a credit check. While these fees are often inexpensive, they are a waste for you. They add up quickly, if you decide to apply for many loans. You do not get your money back if your loan is denied. If a lender charges you an application fee, you should find a different lender.

Loans have administrative fees. These fees pay for the administration and paperwork processing of your loan. Administration fees may also include an application fee. Some lenders combine all of the different fees into one large fee called an origination fee. This typically covers the application, running your credit, processing everything and paying out the money. The most important thing to keep in mind is this fee comes out of your loan. You do not have to put out any cash, but you do not see the full amount of your loan.

Here is an example:

You apply and are approved for a loan of $2,500. The fees total $300. The amount deposited into your bank is $2,200. This is the amount you borrowed minus all fees. This can be a problem if you needed the full $2,500. You should understand the fee schedule before you apply for your loan so you ensure you receive the amount of money you need after all fees.

Number 8 – Documents

You have decided to take the plunge and apply for a loan. Before you so, more things to consider about personal loans are the documents you need. You need to prove your identity. In today’s world, banks cannot be too careful about verifying your identity. Identity theft is rampant, so banks need assurance you are who you say you are. They require picture ID, such as a drivers license, passport, or military ID. This identification must be valid and not expired.

Banks also need to know you can repay the loan. Your income is a large factor in this. You must provide proof of your income to the bank. They may want recent paystubs or bank statements showing how much income you receive regularly. If you do not have a standard job and do contract work or some other form of self-employment, the bank may want to see your tax returns. The sooner you have all of these documents prepared and ready for the bank, the faster you can be approved.

A lender may ask for some other type of document or may have additional forms for you. You should respond quickly to any and all requests. Failure to do so may result in your loan being delayed and even denied.

Number 9 – What Is Pre Approval?

Many people often wonder about pre-approval when thinking about things to consider about personal loans. The reality is that not many people understand what pre-approval really is. To complicate matters, you probably heard the terms pre-approval and pre-qualified. Many lenders use them interchangeably even though they really are not the same thing.

A pre-approval means that the lender has done a hard pull of your credit and taken a good look at it. As a result, the lender believes you are a great candidate for a loan and offers you a pre-approval letter. This letter basically gives you a belief that you can receive a loan with the lender. A pre-approval does not guarantee you an interest rate or monthly repayment amount. The bank may be able to give you an estimate but often you do not lock into a rate until you apply.

A pre-qualification is a little different. The lender has to a soft pull of your credit and made a cursory glance at it. From the quick look, the lender thinks you are a good candidate. This is not a guarantee and you still need to go through the entire application process for approval.

Number 10 – Budget

Your budget is absolutely one of those things to consider about personal loans. Not many people like to talk about a budget, but it can change your life. Creating a budget puts you in control of your money and your spending. Often people see a budget as a limit to your life and spending, but it really is not. It helps you regain control of how you spend your money. It allows you to spend money on the things you really want and need instead of random things you do not even realize.

You should sit down and list out all the items on which you spend money. Prepare to be shocked. You most likely spend money you do not even realize. You probably spend more money on random things than you know. When you write it all down, you can take a hard look at it and remove those extras. This is the time to end that gym membership you do not use. Are you paying for subscriptions you do not use? Now is the time to cancel them.

Once you have slashed all those items you do not use from your spending, now you can look at where else you spend money. You can compare it to your income and begin to make changes. It may be hard at first, but once you see all your savings, it is worth it. You can decide whether you will budget or get a personal loan. You may decide that you save enough money and you do not need a personal loan. Or you may see that you really cannot afford to repay a personal loan and decide to make some changes first. Creating a budget puts you in the driver seat to make decisions instead of feeling like things are out of control.

Eight key steps to creating an effective budget

Number 11 – Do I Need Collateral?

A personal loan is typically an unsecured loan. This means that there is no collateral associated with the loan. This is a risky loan for a bank because there is nothing to hold you to repayment. Collateral is something of value that you offer to the lender as a promise to repay the loan. If you do not repay the loan, they can take the item. A mortgage on a house is a perfect example of a secured loan with collateral. You and the bank own the house together. As long as you repay the mortgage, the house is essentially yours. Once you repay the mortgage, the house legally becomes yours. However, if at any point during the mortgage repayment, you do not pay the loan, the bank can take the house.

If the bank is requiring collateral from you, it means that you have poor credit and they do not want to take the risk. When thinking about things to consider about personal loans, you can decide if you are willing to put up an item as collateral, or if you want to work on repairing your credit. Repairing your credit is possible, but it takes consistent and hard work. It may be something you should consider.

What Does It Mean To Default On A Loan?

One of the major things to consider about personal loans is can you afford it? This is one of the first things to consider about personal loans. If you cannot afford to repay the loan, you should not apply for one. The last thing you want to do is default on a loan. Defaulting on a loan means you are not paying the loan. This often happens when one cannot afford to repay it. You want to do everything you can to avoid defaulting on a loan.

Defaulting on a loan is a huge negative hit to your credit score. It causes it to plummet. In addition, defaulting on a loan is incredibly stressful. Lenders want their money and they work hard to get it. This could mean they send you to a collections company. These companies are ruthless. They do not care about you or your situation. All they want is to get money. The lender may take you to court to get their money.

There are ways to prevent yourself from falling into default. If you realize that you cannot repay the loan, contact the lender before you miss payments. Lenders often work with you to change your payment schedule or payment amount so you can pay something. Lenders want their money and if they can get something from you, it is better than the cost of having to fight for it. Be upfront with your lenders sooner rather than later. It is better to try to work with them than against them. They have more resources than you do and they often win.


We talked about many things to consider about personal loans. There is one last thing I want to take the time to highlight while I still have your attention. That is your ability to afford a loan. Of all the things to consider about personal loans, that is the most important. If you cannot afford to repay the loan, do not apply for one. Look for other options before you dig yourself a deeper hole.

Taking on a loan that you already know you cannot afford is just a bad idea. All it does is hurt your credit and put you in a stressful situation. A loan is not free money. You must repay it. Even though it is money upfront and may feel like it is giving you some breathing room, it is only temporary. In a month, you must start to make payments. Enter into a loan wisely and thoughtfully.


How Can A Personal Loan Help My Credit?

Usually, when someone is searching for a personal loan to alleviate their financial troubles, they are concerned with how this will affect their credit. Often times, people imagine that getting any type of loan will be bad for their credit. This is not necessarily the case. If you use a personal loan responsibly and pay it off on time, then getting a personal loan can actually improve your credit. If you are asking yourself, “Is it really possible for a personal loan to help credit?” then read on.

How can a Personal Loan Help Credit Score

Whether or not you have a good or bad credit score can have an effect on your chances of getting a personal loan, but getting a personal loan can also have an effect on your credit score. This effect can be positive or negative, all depending on you and your actions. Below are some ways in which you can use a personal loan to improve your credit score:

Building a Credit History

It is hard to improve your credit score when you have no credit at all. It can feel like a vicious cycle, trying to apply for a credit card without any past credit. You get denied because you have no past credit. But then you cannot improve your credit by using a credit card and paying it off on time every month. Luckily a personal loan can be a good credit starter. By taking out a personal loan that you can repay monthly, you are showing lenders that you can have a positive relationship with credit.

Repaying the Loan on Time

By taking out a personal loan and then repaying it with reasonable monthly payments, you can prove that you are credit-worthy. Repaying your loan on time is essential to this strategy. By repaying the loan, including interest, on time, you can prove to creditors and lenders that you are credit-worthy. This can increase your credit score, as well as better your chances of getting the loans you need in the future, with much better interest rates.

Pay off a Credit Card

Getting a personal loan to pay off a credit card can help improve your credit score. Using a credit card can in itself help improve your credit score. Having credit cards and using them regularly can help you build credit. When you make purchases and then pay them off, you can end up with lower interest rates and a better credit score. If you cannot pay off the entirety of your credit cards alone, then a personal loan can assist you in spending more (and covering the expenses) while you continue to build credit at the same time.

Consolidate Your Debt

A personal loan can help you consolidate your debt, which improves your credit score for many reasons. One way debt consolidation loans increase your credit score is by allowing you to get rid of your debt faster. By decreasing your debt at a quicker rate, you will have less debt to show on your credit report. Besides having less debt, the type of debt for a personal loan does not affect your credit score as much as the debt on a credit card does. A personal loan is an installment loan. So your credit score will be less affected and you will have more access to available credit. In addition to this, the creation of a more varied mix of credit types will increase your credit score.

What Is a Personal Loan?

A personal loan can be a great option for getting cash quickly. No matter what your current financial status is, you may find yourself in a bind due to unexpected circumstances. Whether you need an emergency medical procedure done or need to relocate for a new job, a personal loan may be the right choice for you.

It’s important that you go to the right lender when taking out a personal loan. Our advice is to consider the following lenders brought to you by Fiona, our trusted partner.

Once you have decided that you definitely want to get a personal loan to help credit it is important to understand what your options are. There are many types of personal loans to choose from:

Unsecured Loan

An unsecured loan is a type of personal loan that does not have a call for collateral. Because there is no collateral used to back up the loan, an unsecured loan tends to be riskier for lenders to give out. While this type of loan can be fast and easy to get, the interest rates and fees tend to be higher.

For instance, Joan has a couple of credit cards that she was offered through the mail. On one of these credit cards, Joan spent $2,000 on various purchases. These credit cards are examples of unsecured loans, since there is no collateral used to back up the loan. If Joan does not repay the credit card company for the $2,000 of purchases, then they cannot automatically take her home or car to make up for their loss. If Joan does not pay this money back, then her case can be sent to a collection agency.

Secured Loan

A secured loan is a type of personal loan that does have a call for collateral. Collateral is some type of asset that can be used by the lender to recover the money that was lent, in case the borrower does not pay it back. Collateral is oftentimes a car or a home. The process of getting a secured loan is lengthier than the process of getting an unsecured loan, but the terms tend to be more favorable. One type of secured loan, a home equity line of credit (HELOC), is like a second mortgage, where your home is put up as collateral.

For example, Michael bought his car when he had a great job. He had worked for the same company for several years and had just been promoted. He felt like he could rely on his position at his company to last for several more years. Because of his comfortable financial situation, Michael bought the best car on the lot. He chose the biggest car, with all the new features. He loved his new car and always showed it off to his friends. Unfortunately, due to budget cuts, Michael lost his job a few months after his big car purchase. He tried to renegotiate the monthly payment of his new car, but he was unsuccessful. Because Michael could no longer make the monthly payments, his nice, new car was taken back as collateral.

Open-End Credit

Open-end credit refers to a credit option where you can “withdraw money as you need it, over an extended period of time.” This can be beneficial if you need to continuously withdraw small sums of money for individual expenses. In most cases, you will not even have to pay interest rates on the money that was not withdrawn from the account. Open-end credit can be done through lines of credit and credit cards.

For instance, Ross just got his first credit card. Ross is excited to have his first credit card, as he is also starting college next week and finally feels like an adult, now that he even has his own line of credit. Ross is also excited that he has a credit card with no preset spending limits, so he can buy what he wants when he wants it.

During his first month at school, Ross buys a new telescope, new flat-screen TV for his dorm room, the newest gaming system, and tickets to a Taylor Swift concert. Ross was living it up until he realized that he actually does have to pay all of this money back to the credit card company. There was no collateral to back up the lender’s money, so they had to send Ross’s case to a collection agency. Instead of enjoying the Taylor Swift concert with his girlfriend, Ross had to work double shifts at the planetarium to pay off his debt.

Closed-End Credit

Closed-end credit refers to a credit option where you are given a set lump sum. This is an example of the traditional idea of loans. You borrow a set amount of money that you must pay back, including interest, over a set period of time. This can be beneficial if you need a large amount of money at once. If you get a single payment loan, then you will have to repay the full amount you borrowed, plus interest, in one sum. Closed-end credit can be done through appliance loans or consumer installment loans.

Imagine, Billy has always gone to the lake with his family for summer vacation ever since he can remember. Now that Billy is starting a family of his own, Billy wants to continue this tradition of taking his wife and kids to the lake for summer vacation. Since Billy and his family loves to water ski, he decides it would be a good investment to buy a boat.

He would save more in the long-run by buying his own boat than by renting a boat every summer. Billy doesn’t have enough money on-hand to pay for a boat though. So he finds the boat he wants and then searches for a boat loan to cover the immediate expenses. With the large lump sum he gets from the closed-end credit boat loan, Billy is able to afford the boat his family wants.

Bill Consolidation Loan

A bill consolidation loan is a type of loan which allows you to consolidate all of your debts into one loan that you can repay at once. This type of loan helps you pay your debts sooner, thus saving money in the long run. It is also easier for you to keep track of, since it is only one monthly payment instead of several different monthly payments. On the other hand, if your credit score is not very good, you may end up being stuck with high-interest rates.

For example, Kristi is excited about her future. She just graduated with her undergraduate degree in business and finance, and she has already been offered a job at a large consulting firm in Chicago. Kristi knows that she has a bright future ahead of her, as well as a larger-than-average starting salary. The only problem is that after her six-month grace period, Kristi will start having to pay back her student loans.

Kristi has enough money with her new salary to pay off the student loans every month, but she has trouble with all of the adult stuff she has to take care of and keep track of. She has to get her own health insurance, pay rent on her apartment, and find a cable company to take care of her Internet and TV connection. For Kristi, it makes sense to consolidate her student loans into one loan, so that she only has to pay one monthly payment. She finds out that with her consolidated loan, she even gets to pay a lower interest rate on her loan(s) now.

Reasons to Get a Personal Loan

There are many reasons why you may need to get a personal loan. Some reasons can be more positive, such as for a wedding or vacation, while some reasons can be more negative, such as for an emergency medical procedure or funeral expenses. Remember that you can also be thinking that “I can get a pesonal loan can help my credit.” Below are some reasons why you may consider getting a personal loan:


Sometimes you need a break from work, school, and your regular life. When you need such a break, a “staycation,” or stay-at-home-vacation, may not cut it. Just because you do not have enough cash on-hand does not mean that you should have to forego the vacation of your dreams. If you want to treat yourself, the way you deserve to be treated, then a personal loan for a vacation may benefit you.

Medical Bills

Medical expenses can be debilitating. It does not matter if you are currently financially comfortable. An accident can occur at any time, and medical expenses are on the rise. According to a recent report published by the Kaiser Family Foundation, over the last five years, health costs rose 18% for those with employer-sponsored health plans. This outpaced increases of inflation and wage. If you are burdened with medical bills that you simply cannot afford, then you may consider getting a personal medical loan.


Your wedding is supposed to be one of the best, if not the best, day of your entire life. Weddings tend to cost a lot of money, with no expense spared. There is nothing wrong with wanting to be extravagant on your special day. But it may not be practical to pay for everything yourself up-front. Not everyone has the cash for a wedding budget on-hand at any given moment. Your dreams of the perfect wedding can be realized through the use of a wedding loan.

Home Improvement

Having a comfortable space that you can call your own is important. If you do not live in a space that gives you happiness and peace, then it will reflect in your mood and overall health. Whether you are adding a new room or renovating your garage, a home improvement loan can help you create a space you can truly call home.


Rather than sprucing up the living arrangements you already have, maybe you need help with relocation expenses. Whether you need assistance paying for professional packers or professional movers, packing materials, a rental truck, storage fees, or even new location expenses, a residency relocation loan can help you. Needing to relocate, whether for a change in job or for any other personal reason, should be exciting, not stressful. Relocation can be a great opportunity for new experiences, and it should not be ruined by the expenses.

How Do I Know How Bad My Credit Is?

Do you know what your credit score is? If not, no problem! There are many online sites that allow you to find your credit score for free. Figuring out how bad, or good, your credit is is the first step in finding the right loan for you. If your credit score is not as high as you would like it to be, do not despair! “Getting a personal loan to help my credit” is a common solution.

credit score factors

But what even is a “good credit score“? Your credit score, which “expresses your relationship with credit in a three-digit number,” is good if it is between 700 to 749. Some creditors will say that they consider anything above 720 excellent rather than just good. Some consider anything over 750 as being excellent. These numbers may not mean much to you on the surface. But it may help you to understand where these numbers come from. Here are a few of the things that make up what your credit score is:

Paying Off Debt

When you apply for a loan or financing of any kind, creditors are interested in seeing what your relationship is like with credit in the past. This means, did you pay the balance of your credit card statement every month? Did you pay the monthly payments on any past loans you have gotten, and did you do so on time? Creditors want to be assured that like a Lannister you always, or at least most of the time, pay back your debt. That way they feel comforted that you will repay whatever they lend you.

Where Creditors Report

There are three major credit bureaus that record credit scores: Equifax, Experian, and TransUnion. When a creditor, such as a place where you have a store credit card, reports your credit, they will only report to one or two of the three major credit bureaus. But definitely not to all three. Because of this differentiation in reporting, not everything will necessarily be considered in each credit score. So you may only fall in the fair credit set with one credit bureau, while you may fall in the good credit set with another credit bureau.

Landlord Credit Check

The fact that creditors do not report everything to all three major credit bureaus could be beneficial to you, while at other times it could set you back. In some cases, you may even be able to run your own credit report. For a landlord credit check, you can choose the credit bureau where your credit score is best. On the other hand, you cannot tell the bank which credit bureau to use in their credit check of you. So this will not always be possible.

Why Is Having Good Credit Important

Now that you have a better understanding of how credit scores and credit reports work, it is important to understand the importance of having good credit. Though you can still do (almost) anything with bad credit that someone with good credit could do, having good credit does make life easier. Here are some reasons why having good credit is important:

Being Credit-Worthy

Since having a good credit score reflects your relationship with credit, having a higher credit score means that there is a greater chance that you will repay your loans, in full and on time. While this may not necessarily true, it can be a good indicator. Because of this, having a good credit score increases your credit-worthiness as seen by lenders.

Easier to Find an Apartment

Once you find the apartment you want, you don’t want anything to stand in your way of being able to get it. If you have good credit, then a landlord will see you as a qualified applicant. On the other hand, if you do not have good credit, then you may not be a qualified applicant in the eyes of the lender. This could decrease your chance of renting the apartment you want.

Lower Interest Rates

If you have bad credit, then you can still get personal loans, just like someone with good credit. The difference will lie in the terms and conditions of your contract. If you have a good credit score, then you will have lower interest rates than someone who has bad credit. Having good credit could save you money in the long run. Since you will have to pay less in interest than someone with bad credit will have to pay in interest.

Be In The Know

It is essential to be in the know when it comes to your credit. Being in the know allows you to make educated decisions about your financial situation. Also, you can prevent any previously unforeseen issues. For instance, when you know you have a major purchase coming up in the next 6 months, you should run a credit from at least one agency.

Because consumers are allowed to get one free credit report per year, it is important to use them when they could have an effect on upcoming purchases. Being in the know also means that if there is somehow a mistake on your credit report, then you can easily spot it in a timely manner. If you do that, you can dispute and have them removed before it has the chance to affect you negatively.

Can I Even Get a Loan With Bad Credit?

Anyone can get a loan, no matter what their credit score is. Though it will be easier for someone with good credit to get a loan — and with a better interest rate — it is still possible to get a personal loan with bad credit. Getting a loan with bad credit is at least easier than getting a loan with no credit at all.

If you have been rejected for more traditional personal loans, then you may still be able to get a personal loan for bad credit. Loans for bad credit can help you get the cash you need, even if you have a low credit score. Typically, there are two reasons for taking out this kind of loan. The first is to cover emergency expenses and the second to rebuild your credit score. Loans for bad credit can be beneficial to your financial future by restoring your credit. Making timely payments on your personal loan for bad credit can show that you are reliable. It also shows you’re likely to pay off future debts, and increase your credit score.

Though you should always shop around for different loan options, credit unions specifically tend to offer options for bad credit. Because of this, you should consider looking for personal loan options at your local credit unions before searching with other sources of credit and financing.


Remember, even if you don’t already have good credit, or if you have no credit history at all, there’s a solution. Getting a personal loan to help credit can kill two birds with one stone. You can get the loan you need and start building your way to great credit.


7 Important Things to Know About Personal Loans

Thinking about personal loans can be a stressful situation. Often times, we approach it as though it is a bad thing. It is almost like “here I go again, I need something I cannot afford”. While there are times when that is true, it does not always have to be bad. A personal loan can be a good thing for you and your financial picture. The key is that you must use it properly and for the right things. I am going to help you understand the good and bad ways to use a loan. Personal loans are not something you should fear, but there are some important things to know about personal loans. Keep reading as I dive a little deeper into the top 7 things you should know about personal loans.

What Is A Personal Loan?

Before we can talk about all the things to know about personal loans, it is important that you fully understand a personal loan. A personal loan in its most basic definition is a fixed amount of money that someone lets you borrow. You promise to repay that amount of money plus a little extra every month until the loan is paid. Seems fairly simple, right? Well, there are some details that I brushed past that are important for you to understand. That someone letting you borrow money is a lender and it is typically some type of financial institution. Personal loans go by many names. You may hear it referred to as consumer installment loans or an unsecured loan. These are all still personal loans.

I mentioned plus a little something extra. That is called interest. The amount of interest you pay changes based on the lender and on your credit. We will come back to credit in a bit. The amount you pay back each month remains the same and you pay it back for anywhere between three to five years. This is all determined before you sign the loan contract. There is often a bunch of fine print. Be sure you read all of that.

Are There Different Kinds Of Personal Loans?

I mentioned earlier that a personal loan goes by many different names. There are also many uses for personal loans and some different types of loans. These are also things to know about personal loans when deciding what to do. You can use a personal loan for just about anything you want. A lender asks you the purpose of the loan, but that really is not a factor in your approval.

Personal loans are often used to consolidate debt or to pay off major medical expenses. When you find yourself in an emergency situation and you are short on cash, a personal loan may be the answer for you. It is important to remember that a personal loan is not the long term answer. You have to pay back the loan each month, so it is important to make sure you can afford to pay it back. Today it is much easier to apply for a loan. You can even get personal loan online in a matter of days. There are loans such as payday loans and cash loans bad credit

The Thought Of A Personal Loan Scares Me

That is completely understandable. Obtaining a personal loan and adding more debt to your life can be a scary thought. The key is to know everything you can about personal loans. When you truly understand the personal loan process, the thought of it is less scary. Understanding all the things to know about personal loans helps you make an informed decision instead of an emotional one.

Remember that a personal loan can help you improve your financial picture when used properly. If your credit is not that great, it can help you improve your credit score when you make your payments timely. A personal loan can help you consolidate your debt so you can focus on one payment instead of multiple smaller payments. This can help you decrease your total amount of debt faster because you can focus on just one debt. It also helps you mentally by focusing on just one bill to pay instead of attempting to pay many different bills.

Important Things to Know About Personal Loans

If you decide to take out a personal loan, you should definitely explore the entire process to get to know the benefits and the disadvantages. But there are some key things we decided to point out, so you’d know what to pay special attention to.

Important Thing To Know About A Loan #1 – Credit

I know this is a topic that few people ever want to discuss. Even the mention of the word credit concerns people. Credit is definitely an area where the more you know, the better you are. This is one of the top things to know about personal loans. I am going to start with basics when it comes to credit.

Your credit score is a three-digit number that appears on your credit report. There is a difference between your credit score and your credit report. Your credit score is on your credit report. Your credit report shows your credit history. It lists all your debts and it shows your payment history, the good and the bad. Items tend to stay on your credit report for 7 to 10 years. It takes a long time to build your credit, but just a few missed or late payments send it plummeting.

A typical credit score ranges from 350 to 850. Most people have a credit score somewhere between 600 to 750. Good credit falls somewhere between 670 to 800. Anything below 570 falls into the danger zone of bad credit. When you have bad credit, it is much harder to get a good interest rate. You may find it is difficult to be approved for a loan, if you have bad credit. It is still possible to get a loan, but you have to work harder and do more research.

What Do I Do If I Have Bad Credit?

One of the important things to know about personal loans is that your credit is the reason personal loans are commonly denied. You should pull your credit report and look at your credit score once a year. This helps you remain in control of it. You can also check it for errors, so you can address them. If there is an error on your credit report, you must take steps to correct it. If you do not know your credit score, you cannot do anything to improve it. You can reduce the amount of debt that you have.

Lenders look at something called a debt to income ratio. This is the amount of debt that you have compared to the amount of income you have. You need to lower your debt to help improve your credit score. Another thing you need to do is begin to create a positive credit history. You can do this by making sure that you pay all of your bills on time and for the correct amount. Late and missed payments are the leading cause for a poor credit score.

Another factor that hurts your credit score is your income and job history. If you have low income, you should work hard to improve that, or find an additional job until you can improve your credit score. Lenders look at the amount of time you have been working for the same employer as part of your credit history. When you have one employer for a long time that shows them you are stable. When you bounce from job to job in short periods of time, or have periods of no employment, that makes then think you are not stable. This makes them think that you are not a good candidate to pay back a loan.

How to Improve Your Credit Score Without Crying

 Important Thing To Know About A Loan #2 – Income

Since we are talking about employment history, let us talk a little deeper about income. You may not realize just how much that impacts your ability to obtain a loan. Add this to the list of things to know about personal loans. Not only does a lender want you to have stable employment and a good income, but they also want you to prove it to them. Lenders require you to show proof of income for personal loans  if they think they might consider approving you for a loan. The most obvious proof of income is a pay stub, but not everyone has typical employment. There are many people who are self-employed or do contract work or possibly even receive payment in cash. They still need to show proof of employment.

Other ways to show proof of employment are a W2. This is a tax document that shows how much money you have made in the previous year. This, however, may not show the income that you received in cash. You can use a tax return as proof of income. This document shows all of the income that you claim, along with any losses that you claim. You must remember that this document shows only the income you claim. You have made income and you are not reporting it as such, it does not show up on your tax documents. Doing so may also cause you problems later with the Internal Revenue Service (IRS), so I would not recommend you do that.

Lenders may also accept bank statements as proof of how much money is going in and coming out of your bank account. It shows your deposits which could be income. Again, this document only shows money that is deposited into your account. If you have cash or money is being deposited elsewhere, it will not show up on that bank statement.

Important Thing To Know About A Loan #3 – Interest Rates and Fees

Interest rates are an annoying thing that always accompanies a loan you get from a lender. Rates and fees are absolutely things to know about personal loans. They can make a big difference in the amount of money you are paying back each month. I am going to list for you some of the common fees and terms you should look for when it comes to personal loans.

  • Principal amount – this is the actual amount of money you borrow. The lender adds interest on to this amount. Typically, lenders have a maximum amount they lend for a personal loan.
  • Interest rate – this is a percentage of your loan. This is added on top of your principal amount you borrow. They are usually a fixed rate. They can be anywhere from 7 percent to 30 percent depending on your credit.
  • Term length – this is the amount of time you are paying back the loan. They are usually fixed, so unlike credit cards, you pay the same amount each month.
  • Prepayment penalties – this is the amount some lenders charge if you pay back the loan before the end of the term. Remember the lender makes money based on the amount of interest they charge. When you pay off the loan sooner, ultimately you are paying less interest and the lender is making less money. They do not often like that. Be sure to read the fine print to determine if there are any early repayment fees.
  • Additional fees – always read the fine to understand any fees you may pay.  A lender must disclose all fees and penalties in the contract before you sign it. It is, however, up to you to read it. Be sure to look for any origination fees, application fees or service charges.

Important Thing To Know About A Loan #4 – Documents

Lenders require many documents in addition to the proof of income we talked about earlier in this article. These are things to know about personal loans before you apply for a loan. If you understand what documents you may need to provide, you can work to get them together and have them ready. This may shorten the length of time for your waiting period while the lender makes a decision on your loan.

Lenders require documentation such as proof of identity. It is important that the lender knows you are who you are claiming to be. With all the identity theft out there today, they cannot be too careful. This is put in place to protect you and the bank. You often must provide a drivers license or some other form of picture ID. That could be a passport, military ID, or state ID. Please make sure that this identification card is not expired. They do not accept expired documents. The lender may also ask to see your Social Security card. This tends to be an optional document only if they need other supporting documentation to verify your identity.

You want to make this process as easy as possible for the lender. Remember, you are asking them if you can borrow money from them. You should provide them any documentation they need. These documents are in addition to the ones we discussed earlier, such as paystubs, tax returns and bank statements.

Important Thing To Know About A Loan #5 – Defaulting On A Loan

Let us talk about defaulting on a loan for a minute. I do not want to spend much time on this because it is something you should avoid at all costs. However, being in default is one of those things to know about personal loans. Basically, when you default on a loan it means that you are not paying the loan. Lenders differ in their definition of default. Some lenders say it is one missed payment. Other lenders give you a grace period of several months before they say you are in default.

No matter what your lender considers default, you want to avoid it. You should also know that a lender will get its money. It does not matter what that lender has to do. They may turn you over to a collections company. Or, they may sue you. They may take you to court and have your wages garnished, but they get their money.

You should focus on always paying your bills on time. If you are not able to pay your bills, then you should be honest with the lender. Call them and let them know you are having difficulty paying the bill. Most of the time a lender is wiling to work with you. It does not benefit them when you do not pay your bills. If they can set up a different payment plan with you, they will make every effort to do so.

Important Thing To Know About A Loan #6 – Pre-Qualified

Pre-approval and pre-qualified are confusing terms that lenders like to throw around a lot. They are things to know about personal loans, so I want to talk about it a little bit. You probably have received those invitations in the mail from lenders stating that you have been pre-qualified and pre-approved. When a lender says you are pre-qualified, it means they have done a soft hit to your credit. That means that lender has looked at your information, but hasn’t done anything that would impact your credit score. The lender took a quick look at your information and believes that you may qualify for a loan with them. However, this does not guarantee your approval. You can still be denied when you apply for the loan and the lender pulls your full credit report.

A hard pull of your credit report requires your approval because it is a hit to your credit report. The lender is able to see everything on your credit report. At times, you may receive a pre-approval from a mortgage company. This is important when you are trying to buy a home. These often are more of a guarantee of approval. For a personal loan, you do not often get those guarantees.

Important Thing To Know About A Loan #7 – Loans For Bad Credit

Earlier in this post I talked about credit and mentioned that if you have bad credit, you have to work a little harder to get a loan. That is still true. Bad credit does not stop you from getting a loan, but it makes it harder. It is one of those things to know about personal loans. Do your homework and it can save you a lot of money in interest and fees. You know that your interest rate is based primarily on your credit score. Also, you know that you can improve your credit score, but it takes times and consistent effort. You do not have time because you need the loan know.

In these cases, you should look for lenders other than a typical bank. Credit unions often cater to those with less than perfect credit and their interest rates tend to remain reasonable. You can apply for a loan with an online lender. The application turn around time is just a few days. It is fast, but often comes with a higher interest rate. Be cautious not to get sucked into fast cash loans bad credit that you cannot afford. It may be tempting but remember you always have to pay it back per the terms of the agreement. If you are not able to do that, walk away from that loan and find another one that fits for you.

We Can’t Forget Budgeting

Since we are talking about a loan that fits for you, it makes perfect sense to talk about budget. You probably thought you would get through this article without having to talk about a budget, didn’t you? Guess what? It is not going to happen. Creating a budget is important and if you do not have one, you need one. If you have one, you need to follow it. This is one of those important things to know about personal loans.

A budget helps you determine how much of a loan you can afford to pay back. You should start by simply writing down all your expenses in one column and all of your income in another. Add up the expenses and if it is more than your income, you cannot afford to pay back a loan. Not only that, but you should begin to decrease some of those expenses. Maybe you can do that with a consolidation loan, depending on the expenses. Maybe you can remove some of the things you are paying for each month.

For example, do you buy lunch everyday? Maybe you can take your lunch instead of buying it and see how much money that saves you per month. I am willing to bet that small change could save you almost $300. You can make simple changes that make a huge impact on the amount of money you have each month. You may determine that by cutting some costs, you do not even need a loan. But, you cannot do these things until you actually sit down and begin to look at how much money you are spending each month.

Do not look at it as a bad thing. Think about it as you taking control of your money and your life. This is an opportunity for you to be in control instead of your money controlling you. It is a powerful place to be and it feels really good. One of those things to know about personal loans is that you always have to pay it back. It is not free money.


In all this talk about the things to know about personal loans, I did not talk much about your ability to afford the loan. It is incredibly important that you make sure you can afford to pay back the loan before you apply for it. You should not enter into a loan contract lightly. You should take the time to consider if this is the right decision for you. If it is and you can pay it back, go for it. However, if you know you cannot afford to pay back the loan, you should stop here.

In all the things to know about personal loans, it is key to remember that you have to make a monthly payment until the loan is paid. Most often, that first payment is within 30 days of you receiving the money. There is not a grace period. The lender want their money to come back to them quickly. You do not want to negatively impact your credit because you took out a loan that you already know you cannot afford to repay. You should look into other options if a loan is not the right one for you.


How Can a Personal Loan Save You Money?

Most people have some kind of debt and the majority of people have a lot of debt. Getting a personal loan to save money can be the answer to help your debt problem. Better debt managing can save you money later on.

A personal loan is money from a lender that you pay back in monthly payments. You will borrow money with a certain interest rate. The interest rate will depend on your credit score and where you get the money.

While there are different variations of personal loans, there are primarily two main types. Unsecured loans are loans that don’t require any collateral. This means the personal loan finance company makes a decision about whether or not you will qualify based on your financial history and credit score. If you don’t qualify for this type of loan with a low interest rate then your second option is a secured loan. Secured loans require collateral. If you don’t pay back the loan then the lender has the right to take your collateral as a form of payment for the loan. Many of the consumer installment loans available are unsecured and since the lender isn’t able to get your assets if you don’t pay back the loan, the interest rates can be higher compared to other types of unsecured loans.

How to Use a Personal Loan to Save Money

There are multiple ways to use a personal loan to save money, but not everything will suit your situation. To help you get informed on how you can help better your circumstances by taking out a personal loan, we will describe the most frequent situation where you can use a personal loan. If you are in a position to think about a personal loan, you should definitely do it.

Consolidate Debt

Debt consolidation is the process of taking your debts and using one loan to pay them off at once. A personal loan may allow you to have a lower interest rate on your debt to help you pay it offer faster. First, you must add up all your credit card debt and other debt. Most people choose not to include their mortgage in debt consolidation and instead just choose credit card debt. Types of debt that can be consolidated are credit cards, auto loans, payday loans, lines of credit, medical bills, legal debt, and gambling expenses.

Loan Shopping Advice

Once you have an idea of how much debt you have then you know the amount of money you will need for a personal loan. Be sure to do some personal loan shopping, in order to find the best rates. You can choose to visit your local credit union or search online. Online lenders will let you pre-qualify for a personal loan so it doesn’t affect your credit score. In addition to looking at interest rates, you should also look at other fees upfront, such any origination fees that can vary between 1% and 5% of the total loan amount.

One of the best places to look for reputable lenders online is Loanry. This is what we do. We connect you with credible lenders and help you go through this process a bit quicker.

After You Get Approved for a Loan

Once you have the money deposited in your account, which doesn’t take long if you get approved online, then you can pay off your debt and on your credit cards with that money and afterwards focus your attention on payments to your personal loan. When choosing a personal loan, be sure it’s an unsecured loan. Unsecured loans don’t require any collateral. Even though there may be higher interest rates, this won’t put any of your assets at risk if for some reason you have issues with payment.

When you use a personal loan to consolidate debt, you can reduce your interest rate. If you qualify for a lower interest rate then you can use a personal loan to save money. It also helps to lock in a low rate. Sometimes when borrowing money your interest rate is variable and changes. This means that it can go up and down. If you don’t want to owe money at variable rates anymore then a fixed rate personal loan can allow you to know exactly what your payment will be. Avoid personal loans with low teaser rates since these rates do go up. Find the maximum rate you could be charged for any loan you are using for consolidating debt.

Repaying a Loan

With a personal loan, you have a repayment timeline. You agree to pay back the money you take out from a personal loan on a set schedule that is specified in the loan agreement. Since you will have this payment schedule you know exactly when you will become debt-free if you pay on time. If you want to pay off the loan early, check with your lender about any prepayment penalties. Depending on how your interest is structured within the loan, you may or may not have a prepayment penalty. If you don’t have one and can pay off the loan early then that means you can get out of debt faster.

When to Use a Personal Loan to Consolidate Debt

In your order to use a personal loan to save money, it needs to make sense. If you aren’t prepared, taking out a loan can just open you up to spending more money.

You Have a Plan to Pay Debt

Before you make a decision on a personal loan, you need to have a plan. If you just roll up the credit card balances into a big personal loan without an idea of how you will pay it back then there is no point. Will the new monthly payment be feasible? If you are struggling to pay it and end up relying on balance-free credit cards then you won’t be saving any money. It helps to be honest with yourself about your will power and what you can afford.

How Big Your Debt Is

Using a personal loan for consolidating debt is a good idea if you have a moderate level of consumer debt. If you can pay off your debt within the next five years then a personal loan can make sense. If you can expect to pay off the debt within the next six months to a year then a personal loan may not be worth it. The small amount of interest money you can save may not be worth the trouble. If you have no idea how you will pay off your debt in the next few years then a personal loan may not be enough. You likely need credit counseling and a professional that can help you out.

You Have Spending under Control

Consolidating doesn’t just make your loans disappear but instead it moves it around. The debt means you are living beyond your means. If you know the reasons you aren’t charging on your credit cards is just because they are maxed out then a personal loan may actually enable you to spend more. If you have already come to the realization that your spending was out of control and have vowed to lower it then a personal loan can help you streamline and simplify your debt.

Your Credit Score Is High Enough

If your debt has already affected your credit score then a personal loan may not be cheap enough to make it worth it. The credit score requirements for the best interest rates on a personal loan can be high. In order to get a single-digit interest rate, you need a credit score over 760. If you always make your payments on time despite your high balances then your credit score may be high enough to get a lower rate than what you currently have on your credit cards.

However, if you have missed payments then your score likely isn’t high enough for a good interest rate. If you can’t get a lower interest rate than your existing one then you may still have an advantage. You have fixed monthly payments and the loan will eventually be paid off. This can help you from getting stuck in the trap of just making minimum payments all the time and not actually making a dent in the debt.

How to Apply for a Personal Loan

Applying for personal loans can be an easy process, especially if you are working with an online lender. Online lenders will speed up the application process and give the money to you in a short time. Before you settle on any particular lender, you need to check interest rates and their charges. Every online lender will have its own customized rates and structures so you have to shop around before you decide on one. Shopping around is very important if you are trying to use a personal loan to save money. When shopping around and determining your rates, you will be required to provide some information and the lender will look at different factors. Some of the factors lenders will use include your credit score and history, your income and employment, and your debt-to-income ratio.

Advantages of Personal Loans

There are a number of advantages of a personal loan and if used correctly, you can use a personal loan to save money.

Consolidate Credit Card Debt

Debt consolidation might be one of the top three reasons that people use a personal loan. This is one of the ways for a personal loan to save money. If you have a lot of debt, why are you paying through the nose with high-interest rates when you can manage debt with a cheaper interest rate? A personal loan has become an easy-to-use tool for which a consumer can swap out higher interest rate credit card payments with a more manageable schedule of a personal loan.

By using a personal loan to consolidate debt, there are multiple benefits. The first benefit is clearing off debt from credit cards. This is known as revolving account debt and it will usually lower your credit score when the balance is high. The second benefit is changing the debt schedule. Personal loan balances don’t keep growing and are capped. As long as you make your payments then the loan will decrease and be paid off. However, this will only work if you don’t continue to rack up more debt on your credit cards. The third advantage is switching your debt to one payment. This can be easier from an organizational advantage.

Cash flow management can be a big problem, especially if there are multiple accounts to juggle. When you have your debt in one payment, you can pay it right when a paycheck comes in and it’s easy to manage.

Used for a Number of Purposes

Many bank loans are purpose-specific but personal loans can be used for just about anything. The funding gets approved almost immediately when you search for loans online. The lender doesn’t get in your business about what you are using the money for. Instead, they are focused on whether you are a good borrower, don’t have any late payments, and will pay back the loan on time.

Efficient and Convenient

With a personal loan, the process is quick. With a bank-funded loan, the process can take weeks. Sometimes, you may not have eight weeks to wait for financing to happen. There is a very fast approval process when you choose to get a personal loan. It will usually take to three business days. The funding will go directly to your bank account and show up quickly. The payment can also be very convenient. Electronic payments mean you don’t have to remember to put a check in the mail and can make sure you are paying on time.

How Does a Personal Loan to Save Money Impact Your Credit?

There are a number of ways a personal loan to save money can affect your credit. A personal loan can affect your credit score depending on the different actions you take.

Applying for a Loan

The formal application for a loan will trigger a credit check. This type of hard inquiry will take away some points for your credit score, although it doesn’t make a big impact.

Shopping for a Personal Loan

Many loan places will allow borrowers to pre-qualify using a soft credit check that won’t affect your credit score. This will allow you to shop around for different lenders in order to find the best rate and terms. When you are comparing multiple lenders, inquire about whether or not the lender offers the soft check to help protect your score.

Repaying the Loan

If you repay the loan regularly then this can help your credit score. Your ability to repay a loan will make up about 35% of your credit score. A consistent record for one-time payments helps build your score in the long run. However, if you miss a payment this can negatively impact your credit score. Even if you don’t miss a payment and are just a few days late, your credit can still be affected.

Different Elements of Personal Loans

There are several elements that can affect a personal loan. If you are getting a personal loan to save money, you will need to be aware of these different elements and how they can affect monthly payments.

Interest Rate

The interest rate will have a big impact on payments. It’s the amount of money you pay to the lender on top of the money you took out for the loan. The interest rate on a personal loan will stay the same throughout the length of the loan term.

Term Length

This is the amount of time the lender gives you to repay the loan. Personal loans will have a fixed time length and you need to make the payments on time. Payment amounts will always be the same. The terms on a personal loan can range between just a few months to even longer than five years. Three years is the average that people have to pay off their personal loans.

Borrowing Maximum and Minimum

This is the minimum amount and maximum amount you can borrow. Some lenders can give higher amounts to those with great credit scores.

Prepayment Penalties

Like many other loans, personal loans can come with stipulations when it comes to repayment. If you want to repay faster than the stipulated period then be sure to check the prepayment agreement to see if there are any penalties.

Inclusive Fees

Many lenders will apply several different fees to personal loans. These fees can include origination fees and service charges. An origination fee is the amount of money you have to pay at the start in order to have the loan set up. When applying for different loans, be sure to read the fine print so you know what fees you will be responsible for.


This is the amount of money you pay every year in order to borrow a loan. This fee will also include the interest rate. This is the total amount of money you are charged with every year when you borrow for a personal loan. Just like interest, your APR will depend on your credit score.

Personal Loan Basics Spelled Out: Loan Shopping 101

How Interest Rates Impact a Personal Loan to Save Money

Personal loan interest rates make a huge difference to the monthly payment. Your credit score is one thing that will directly impact the monthly payment. The better your credit score, the lower the interest rate you can get. If you want to consolidate debt then you need a lower interest rate. If you don’t get a lower interest rate, then what is the point? For example, if you get a personal loan of $20,000 and the interest rate on the loan is 10% then the total interest you will be paying is $2,000. If you have bad credit and have a 25% interest rate on the same amount of money you are now paying an extra $5,000 on your loan amount.

Ways to Qualify for a Personal Loan to Save Money

If you are getting a personal loan to save money then it’s about more than just getting approved. You want to get the lowest interest rate possible. The best thing to do is to make sure that your credit score and history are in the best shape. This is what lenders will rely on to establish your finances and borrowing behavior. In order to improve your credit score, be sure to check your credit reports and notice any errors. If you notice an error then file a dispute to fix it. Be sure to fix any late payment issues.

You should also reduce your debt as much as possible. Your debt-to-income ratio and the amount of debt you have helps determine whether you qualify for a personal loan. In order to increase the chances of qualifying for these loans, you should reduce debts as much as you can.

In order to qualify for a personal loan with low income or bad credit, you can get a co-signer. However, if you are looking at using a personal loan to save money then this may not be the best option. Even with a co-signer, you still may have high-interest rates and you are putting your co-signer at risk if you don’t pay back the loan.

One way to make sure you get a good interest rate is by personal loan shopping. Shopping around for personal loans will allow you to identify lenders with flexible loan terms and requirements so you can make sure you are getting a good interest rate and avoiding fees that will not end up saving you any money.

Uses of a Personal Loan

There are plenty of different ways to use a personal loan. It’s even possible to use a personal loan to save money. The flexibility is one of the biggest advantages of using this kind of loan. These types of loan can cover anything as long as you have a credit score that allows lenders to take a chance on you.

Home Repair

Sometimes you may find yourself needing to make home repairs but you don’t have the money to pay a contractor. Emergency home repair loans can help. These loans give you the financing you need and allow you to pay back the loan over a period of time. Home repairs can come in different forms and while there are some projects that you may be able to do yourself, sometimes you just need to call in a contractor.

Car Repair

Car trouble is almost always unexpected and it can be hard to go without a car. A personal loan for auto repair can be a good way to get your car fixed with a lower interest rate and monthly payments you can afford. While there are other options for getting your car fixed, you need to make sure you evaluate them in order to make the best decision. While a car is a necessity, check to make sure the auto repair is worth it before you go into debt.

Medical Expenses

Medical expenses are one of the top reasons people use personal loans. Examples can include dental work, fertility treatments, and other procedures that generally cost $5,000 or more and aren’t typically covered by medical insurance. Other expenses, such as medical travel, medications, and aftercare, can also be financed by a personal loan for medical expenses.

A Large Purchase

If you need a new washer and dryer or a new computer and don’t have the funds then you would have to dip into savings. Some of these items can end up costing you more than what you have in a savings account. Personal loans will allow you to purchase major household appliances and electronics now when you need them, instead of having to wait months to save up.

Debt Consolidation

Many people want to use the money they get from a personal loan to improve their financial situation. One of the ways to do this is by using a personal loan to reduce higher interest debts. Using a personal loan makes it possible for people to pay down their debts and lower the interest on the debt. When you reduce the overall interest amount, it reduces the amount of money you pay on your debt or the duration it takes to pay it off. You can also make single payments to make managing debt even easier.

Whatever your reason for getting a personal loan is, it’s important to keep a few things in mind. You only want to borrow what you need for the expense and what you can comfortably pay back. Don’t increase your debt for reasons that aren’t important. Taking a personal loan when you don’t have a source of income to be able to pay it back can be a costly mistake. While personal loans are flexible in their uses, this may not be a good strategy for buying gifts, paying for vacations, or other luxuries.


Personal loans have a lot of different uses. It can be easy to apply for a personal loan online where you can shop around for different rates to make sure you are getting the best interest rate possible. In order to use a personal loan to save money, you need to make sure you are getting the best interest rate available.

One of the main advantages of a personal loan to save money is to use it to consolidate debt. When using a personal loan to consolidate debt, you need to know when it’s best to use it. Unless you have a plan in place for debt repayment, a personal loan may not be the best choice. In order to increase your chances of lenders approving you and getting a better interest rate, you need to work on your credit score. Personal loans can also negatively impact your credit score if you aren’t careful about payments or fail to shop around for a loan correctly.