There may come a time in your life when you need to borrow money. Maybe you have accumulated some kind of medical bills; have lost their job; or your car decided to stop working and the cost of repairs was astronomical.
When it comes to borrowing money, you have a choice. Many people can quickly find credit card… But a personal loan can be a more cost effective way of borrowing. Read on to find out more about personal loans and when you should receive it.
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What is a Personal Loan?
Personal loan allows you to borrow money for any reason. This could be:
Personal loans are unsecured, which means they are not tied to a specific asset, unlike mortgages and car loans. Thus, in order to qualify for a personal loan, you usually need a decent credit rating. There is personal loans for fair creditbut they usually come with higher interest rates.
For more information, check out our guide to find out how personal loans work…
Will you save money by taking a personal loan?
A personal loan can be the cheapest way to get a loan in terms of interest rates. But to understand if this is so, you need to ask yourself the following questions:
1. How much do I want to borrow?
Personal loans usually come with a minimum loan amount. In some cases, lowest amount you can borrow can range from 1000 to 2000 dollars, but in other cases it can be higher – more than 5000 dollars. If you only need to borrow a few hundred dollars, then a personal loan may not be a good money-saving solution because it can result in you getting a higher loan balance than you really need.
2. What interest rate will I qualify for?
As mentioned earlier, the higher your credit score, the more likely you are to receive good interest rate on an individual loan… To make sure you get the best rate, look for a loan and see what offers you get.
3. Can I instead qualify for a credit card with a 0% annual interest rate?
Personal loans usually charge less interest than credit cards, but there are exceptions. If you can provide Credit card with 0% annual interest rate with a long introductory period, this may be your cheaper borrowing option.
Just make sure you can pay off your balance by the time your introductory period comes to an end. If you don’t, you will immediately get a slap in the face. credit card interest rate it could have been a lot. But if you are eligible for one of these cards and think you can repay the loan fairly quickly, then a personal loan may not be the best option.
A personal loan can save you money the next time you need a loan, but this is not always the case. Before applying for one of these, please answer these questions to make sure you are taking the right step.