If you’re facing large bills or unexpected expenses, a personal loan could come in handy. It’s a flexible financial tool you can use for a variety of purposes. In this article, we’ll look at what personal loans are and how they can be used.
Here’s what we’re going to cover:
- What is a personal loan?
- What can I use a personal loan for?
- What personal loans can’t be used for
- Do I need good credit to get a personal loan?
- How to find the right personal loan
- Oportun: Affordable lending options designed with you in mind
Key takeaways:
- A personal loan is a lump sum of money you borrow from a bank, credit union, or online lender.
- You can use a personal loan to cover emergency expenses, monthly bills, home improvement projects, large purchases, and many other costs.
- To find the right personal loan for your situation, shop around and compare interest rates, fees, loan amounts, and repayment terms.
What is a personal loan?
A personal loan is money you borrow from a bank, credit union, or online lender. Once you apply and are approved for a loan, the lender will provide the money in a lump sum, usually by direct deposit to your bank account. Then you must pay back the amount you borrowed, plus interest, over a specific period of time. Most personal loans last from one to seven years, and repayment amounts are fixed.
What can I use a personal loan for?
Personal loans can help you cover a wide variety of expenses. Here are some examples of how you might use a personal loan.
Emergency expenses
If your car breaks down or you face an unexpected medical bill, consider taking out a personal loan. It’s a good way to meet expenses when you don’t have enough cash on hand.
Monthly bills
A personal loan can be helpful if you’re behind on monthly bills like utilities. You can use the money from a personal loan to get caught up and avoid late fees or other penalties.
Home improvement projects
With a personal loan for home repairs and updates, you may find it easier to remodel your kitchen or add on a new deck. You’ll be able to enjoy home improvements without waiting until you have the total cost saved.
Debt consolidation
If you have a lot of high-interest debt, you might want to consolidate it with a personal loan. Debt consolidation streamlines the repayment process and could also save you money on interest.
Large purchases
Want to buy new furniture? Have a dream wedding? A washer and dryer? Up-to-date computer equipment? Personal loans can be used for many large purchases like these.
Moving costs
Moving expenses can add up quickly. The money from a personal loan can help you afford truck rental, moving supplies, packing services, and related costs.
Vacation expenses
A personal loan for vacation can turn your adventure into a reality. It’s a great way to pay for flights, hotel accommodations, and other travel expenses.
What personal loans can’t be used for
Although you can use a personal loan for many expenses, there may be some restrictions. Most lenders do not allow you to use a personal loan for business expenses or the down payment on a home. And personal loans don’t usually cover college tuition. Before you take out a personal loan, check the loan agreement to make sure you know what the money can and can’t be used for.
Do I need good credit to get a personal loan?
Many lenders require a high credit score for personal loans, but some do not. If you have no or low credit, do some research online to find a lender who will work with you.
How to find the right personal loan
Here are some things you’ll want to compare as you shop around for a personal loan.
Interest rates
Your interest rate will determine the overall cost of your personal loan. The lower your interest rate, the less you’ll spend on the loan.
Fees
Lenders typically charge origination fees and other fees in addition to interest. Look for a personal loan with minimal fees.
Loan amounts
Personal loan amounts vary widely, from $300 all the way up to $100,000. Applying for only the amount you need can help keep payments affordable, and may make it easier to get approved.
Repayment terms
In most cases, you’ll have from one to seven years to pay back your personal loan. A longer term can mean lower payments, but it will also cost you more in interest.
Credit requirements
If you’re still building your credit or have a low credit score, look for a lender with flexible credit requirements.
Online reviews
Before you sign an agreement to take out a personal loan, check online to read the lender’s reviews. This can help you find a reputable company whose customers are satisfied with their loan experience.
Oportun: Affordable lending options designed with you in mind
Now that you understand what personal loans can be used for, you may want to explore Oportun’s affordable lending options. Visit our homepage to learn about:
- Personal loans
- Credit cards
- Secured personal loans
- And more!
Sources
Consumer Financial Protection Bureau. What is a personal installment loan?
Experian. What can a personal loan be used for?
Bankrate. The top 9 reasons for personal loans
CNBC. Personal loans can be used for almost anything — here are expenses they can’t cover
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