Whether you're getting married, dealing with the passing of a loved one, or your toilet is cracked and you need major bathroom repairs, it's obvious that a hefty sum is needed quickly. A great way to cover these costs is by taking a personal loan.
What Is a Personal Loan?
The textbook definition of a personal loan is "an amount of money you can borrow to use for a variety of purposes". However much was borrowed will have to be paid back with interest over time. It can have a "fixed rate" (which won't change over the loan's lifetime) or a "variable rate" (which can change over the term of the loan on the basis of ever-changing market interest rates).
Personal loans are usually broken down into two parts. The principal is the amount you borrow, while the interest is the fee you pay to the bank or other lender to borrow the cash. In some cases, you may also have a fee for paying off early, which is called an “early payoff fee” or “prepayment penalty.”
A personal loan is a good alternative to using a credit card if you need cash now and you’re concerned about paying credit card interest due to the high balances you have on your cards.
When Is the Best Time to Get One?
There are a number of reasons you could benefit from taking on a personal loan. Consider doing so during the following moments:
Combining high credit card balances
Personal events (funeral for a loved one, wedding, etc)
Alternatively, personal loans shouldn't be taken out if there's a need to pay college tuition, finance a new car or pay down payment on a house.
How Do You Apply for Personal Loan?
Thankfully, there's nothing too confusing or complicated about applying for a personal loan. Recent events have led to many lenders expanding their services online. A good rule of thumb is to shop around first. Personal loan lenders compete on interest rates, loan terms, and fees, so it pays to do so when you're ready to take out a loan.
Aside from the amount being borrowed, standard information submitted during the application involves income, employment, monthly expenses and even outstanding debt. You might also be required to submit a credit report and other financial documents.
Keep in mind that lenders will likely do a hard inquiry on the credit report to check your credit score and get a proper look at your credit history. When that happens, your credit score will take a small hit but it will only last for a few months. Of course, this is dependent on bill payments being made on time. Again, there might be a dip after the loan is issued. A quick recovery is also dependent on repayments being timely.
Personal loans are a great option for anyone that needs a huge sum quickly, which is the key advantage. It can be repaid with a fixed rate or variable rate, depending on the agreement with the lender. Benefits include helping to consolidate credit card debt, covering emergency costs and having funds on-hand for a major event like a wedding.
Looking to take out small personal loans in Murfreesboro, TN? Reach out to Hometown Finance! We’ve been serving the heart of Murfreesboro and the surrounding area for twenty years now.