
Personal Loans – FAQ
Millions of people rely on personal loans to pay unexpected
expenses or make large yet necessary purchases. They're appealing because they
typically have lower interest rates than credit cards, and simple monthly
payments. Of course, personal loans are just one of the many financial options
available to you when you need money. Get more info on personal loans and find
out if they're right for you.
What Are Personal Loans?
Personal loans are loans that aren't earmarked for specific
purposes, such as an auto loan or a mortgage. Instead, people can apply for
personal loans for a variety of reasons, such as consolidating credit card
debt, covering medical expenses, or buying new appliances for a home. With
personal loans, you pay back the money in fixed monthly installments until the
entire balance is paid off.
Are There Different Types of Personal Loans?
There are two main types of personal loans. An unsecured
loan isn't backed by collateral. Secured loans, on the other hand, require you
to put up a form of collateral or asset before being granted the funds. If
you're unable to make the payments, the lender has the right to claim the
asset.
How Much Can You Borrow?
Personal loan amounts typically range between $1,000 and
$50,000, notes Experian. You usually have between two and five years to pay
back these loans. The amount that you're eligible for depends on your credit
score, your income, and how much debt you already have. In general, lenders
favor borrowers with credit scores of 680 or higher, notes Finder.
What Are the Fees and Costs Associated With Personal Loans?
Before signing on the line and accepting a loan, it's
important to go over the terms and note the fees and costs associated with it.
Interest is the amount of money the lender charges for allowing you to borrow
the money. This commonly ranges from 5 percent to 36 percent, depending on the
lender and your financial history, notes Credit Karma. An origination fee is a
one-time fee added to your loan to cover the cost of processing it. Some
lenders also charge prepayment penalties if you pay off the loan before the
term ends.
How Do Personal Loans Impact Credit Scores?
How a personal loan impacts your credit score depends on the
lender. Once you submit your application, the lender typically pulls a copy of
your credit report. This is known as a hard inquiry, and will lower your credit
score by a few points. It's for this reason that you should do research on loan
options ahead of time. This helps you find the one that you're likely to
qualify for, and that best suits your needs.
Do you have a major purchase to make or unexpected expenses
that don't fit in your budget? Consider CreditBox for the cash you need with
loan amounts up to $4,000. Apply
online today — it's fast and easy!