Learn about your options and how you can apply for financing.If you’re looking to make a big purchase, a number of small purchases or consolidate existing debt, you might wonder if a personal loan is the right choice for you. Not all loans are made equal, so familiarize yourself with your options before jumping into an application.
What is a personal loan?
A personal loan is money you borrow from a financial institution. Both the principal and interest must be repaid by the end of the loan term, which is usually between one to seven years. You may be able to borrow from $1,000 to over $100,000 depending on your finances and creditworthiness.
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What can I use a personal loan for?
Personal loans can help you in a variety of different situations, including:
- Consolidating debt. If you have existing loans or credit card debt, you may be able to save on interest and fees by taking out a debt consolidation personal loan.
- Making a large purchase. Most large purchases, including jet skis, engagement rings and a new swimming pool, can be financed with a personal loan.
- Buying a car. If you’re buying a new or used car, you can consider a personal loan to help you get behind the wheel. In fact, a car loan is a type of secured personal loan.
- Going on vacation. No matter where you want to go, you can look into an unsecured personal loan for to pay for flights, hotels and other incidental travel expenses.
- Much more. You can use a personal and much more. As long as your lender allows it, you can use a personal loan for just about anything, including dental work, medical bills and pet care.
How can I compare personal loans?
When you’re ready to get started, there are two main factors to consider when comparing personal loans:
- Fixed versus variable rate. Ask your lender how it intends on calculating interest. Fixed rates guarantee a certain interest over the life of the loan, while variable rates can fluctuate based on the market. Some loans may use both systems, so it’s important to note which yours uses to you can prepare your budget for repayments.
- Secured versus unsecured. When comparing loans, ask if you need to put up an asset as collateral. A secured loan requires collateral but will generally have better terms. On the other hand, an unsecured loan doesn’t require collateral and will usually have less competitive terms, but you don’t risk losing an asset if you default.
How can I get a personal loan?
Once you’ve found the right personal loan for your needs and financial situation, it’s time to apply. Here’s what you need to know to submit your application and be approved.
- Check if you’re eligible. The eligibility criteria given by lenders is usually the minimum they will accept, so you must meet the minimum age, income and employment requirements. The lender may also require you to have good credit or to finance a particular purchase. If you don’t meet the criteria, you probably aren’t eligible for the loan.
- Confirm the loan is right for you. Can you apply for the amount of money you need? Will you receive your loan in time? Will you be offered terms, fees and rates that meet your budget? If you won’t be getting the terms you want, it’s better to consider your other loan options.
- Find out what documents you need. The majority of lenders let you submit your documents and complete the entire loan application online. You may need digital copies of your ID, employment and financial documents to send to the lender to verify the information you provide in your application.
- Submit your application and wait for approval. If you submit your application online, you’ll usually receive a response quickly. Some lenders will tell you within a few minutes if you’ve been approved, while others may take a few days or weeks to process your application.