Personal loans are the second-most popular type of loan in the United States, making up almost 10% of all outstanding debt.
They’re also one of the most misunderstood forms of credit. Many people think personal loans online are always wrong, or you can only use them for certain purchases. So the reality is much different—and more enjoyable! If you want to learn more about this popular form of credit, read on.
You can’t get a loan unless you have perfect credit
You can get a personal loan with bad credit. Even if your credit score is lower than what you’d like, there are still ways to receive a personal loan. If the lender believes they can get their money back, they will be willing to provide you with one.
You don’t need perfect credit to qualify for a personal loan. Regardless of how bad your credit may be, some lenders will work with you and allow you to build up good habits so that you’ll have decent credit down the road when it’s time for another big purchase.
You should never take out a personal loan.
While you should never take out a personal loan if you can’t pay off your credit card debt, there are times when taking out a personal loan makes sense. For example, if you’re looking for an affordable way to get a car or home repairs that will enable you to earn more money, taking out a personal loan may be the best option.
“If you need a personal loan and have little to no credit, a cosigner may be able to help you get approved for a loan with lower interest rates and more favorable terms than you could get on your own,” says Lantern by SoFi advisors.
However, consider the associated interest rate, fees, and repayment terms before taking out any loan.
There are too many fees.
While some of these fees are unavoidable (think paying for the cost of processing your application), You can avoid others. For example, shop around and check out the rates from different lenders before settling on one if you’re looking for a personal loan. For example, you may find that not all lenders offer the same terms concerning fees and interest rates, which could make all the difference in whether or not your loan is worthwhile.
It’s always cheaper to borrow from a credit card.
Credit cards are not an excellent way to borrow money. Cards can charge interest rates of 20% or more and don’t offer any protection from unexpected expenses or emergencies. If you are considering taking out a credit card loan, think again! Personal loans have lower interest rates and monthly payments than credit cards.
Personal loans are an excellent way to get cash when you need it. Consumers need to know that these loans can help them build credit and don’t always have to be pricey. Personal loans are a good option if you’re looking for a loan with flexible repayment options or high-interest rates that aren’t available on credit cards.
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