A personal loan allows you to borrow money over a set term and consistent monthly payments, usually with a fixed interest rate. It can provide a quick source of funds for many purposes, including paying for major home repairs, medical expenses or debt consolidation. Personal loans can be secured or unsecured, and lenders typically consider the creditworthiness of applicants. You can find competitive personal loan rates by comparing offers from different lenders.
The amount of a personal loan depends on your creditworthiness, the lender’s assessment of how likely you are to pay back the loan, and the fees and terms that apply. Personal loans range in size from around $1,000 to $50,000 or more, with loan terms of one to seven years.
Some personal loans are backed by collateral, such as a vehicle or savings account, which could be seized in the event of a default. This type of personal loan is often easier to qualify for, because it gives the lender a degree of assurance that you can make your payments. Secured personal loans also tend to have lower interest rates than unsecured personal loans, since the lender has an asset it can use to recoup its losses if you don’t meet your obligations.
Before applying for a personal loan, review your credit report to ensure you have an accurate and complete record of your borrowing history. You should also know how much you can afford to repay each month, as missed payments can have negative effects on your credit score. You can improve your chances of getting a personal loan by taking steps to raise your credit score, such as disputing errors in your reports and paying off existing debts.
To qualify for a personal loan, you must be at least 18 years old and have a valid Social Security number or Individual Taxpayer Identification Number (ITIN). Some lenders also accept proof of U.S. citizenship or lawful residency, such as an employment visa or passport. Lenders typically conduct a hard inquiry on your credit when you apply, which can cause a small dip in your credit score for a short time. However, you can use a prequalification tool, such as the one offered by WalletHub, to see your approval odds with multiple lenders at once without doing a hard inquiry.
A good credit score is important for qualifying for a personal loan, as it accounts for 35% of your credit score. A higher score makes you a more attractive borrower and may help you get better loan terms. In addition, you can save money on interest by shopping for the best rate and avoiding high fees. You should also familiarize yourself with your options for repayment if you’re unable to make the required monthly payment, which could include deferment and forbearance. If you are unable to make your payments on time, contact your lender as soon as possible to discuss options. These could include deferment or forbearance, a modification of your payment schedule or even the option to refinance your personal loan.