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What Is a Personal Loan?

May 14, 2019

Image result for What Is a Personal Loan?A personal loan is a set amount of money you borrow from a lender that you agree to pay back with interest, over a certain time (typically two to five years).

Personal loans are usually unsecured which means you don’t have to offer anything as collateral (like your house or car). And once your loan is paid in full, the account is closed (also known as an installment loan).

In this post:

Personal loan uses

While you can use a personal loan for whatever you’d like, there are a few different types of loans and ways you can put your loan to use, including:

Personal loan rates and terms

Personal loan lenders use your credit score, income, and other personal financial information to determine if you’re eligible and what your interest rate will be.

There are also different terms and rates depending on what your personal loan will be used for. For example, you may be able to get a longer term loan with a lower rate for home improvements compared to paying off credit card debt.

For personal loans, you may have to choose between a fixed or variable interest rate:

Personal loan alternatives

Depending on what you need the loan for, and the loan amount, you might consider these personal loan alternatives:

Learn More: Home Equity Loan vs. HELOC

How to qualify for a personal loan

There are a couple of main things you’ll need to qualify for a personal loan:

  1. Good credit history: Lenders will check your credit report before you get a loan. Some lenders give out loan offers if you have a not-so-great credit score, but the higher your score, the more likely you are to qualify for a loan. Because it’s an unsecured loan, your credit score is one of the most important factors in determining if you qualify (and what your interest rate will be).
  2. Steady income: Lenders are checking out your income and employment to make sure that if you take out a loan, you can afford to pay it back on time every month.

The bottom line

Each lender has their own requirements for who qualifies for a personal loan. So, make sure to compare multiple lenders to find the one with the best repayment terms for your situation.

Credible allows you to fill out a single form in two minutes and compare prequalified rates from multiple online lenders who offer personal loans to help you find your lowest rate — with a soft credit check that won’t affect your credit score.

[“source=credible”]


Categories: Personal Loan