A personal loan is a lump sum of money given to borrowers from lenders. Typically, personal loans can be used for a variety of personal spending purposes including debt consolidation, home improvement, travel, bills, large purchases, and more.
Keep in mind that every lender will have different requirements, so check with your financial institutions about what you are allowed to use your loan money on. Personal loans can be required from a credit union, bank, or online lenders.
In all cases, you will submit an application with your identity and credit information. Both your interest rate and loan amount will be determined by your creditworthiness and desired requirements, outlined in the application. Personal loan interest rates may vary if you have a fixed rate loan agreement.
Sometimes your lender will look at your existing debt to calculate a debt-to-income ratio. For this reason, all borrowers should see if their prospective lenders perform a soft or hard credit inquiry. Similar to interest rates, debt payment obligations will vary from lender to lender.
Once you reach a loan agreement and look over the personal loan eligibility details, the money will be deposited into your savings or checking account. Personal loans feature repayment terms which can be paid off on a monthly basis.
Some personal loans have an origination fee borrowers will pay after loan approval. Others will have prepayment penalties, which means you will be charged for paying off your loan early. Another thing to look out for is late fees, which means you will be charged for missing a payment.
If fees are a concern for you, there are personal loans available that are free of added fees. Similarly, some personal loans we mentioned on this list will allow for cost-free payment deferment.
Personal loans are some of the more flexible loan types that allow for a variety of applications, and even boast a variety of benefits, depending on the lender you choose. We recommend using this list as a basis to conduct your own research based on your personal needs and requirements.