Now you can get a personal loan with an interest rate of up to 3%. Isn’t it time to rethink how you pay for these 5 things?

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About 19.4 million Americans had a personal loan in 2020, according to LendingTree. This is probably in part because personal loans can be obtained fairly easily and quickly – you can apply, get approved and receive funds within 24 hours – and their rates are low right now. Check out the lowest individual loan rates here

Indeed, for a certain type of personal loan and for highly qualified job seekers Lightstream has rates below 3%… Although it is at a very low level, for other issuers, rates start at 6%. And it can save you money, too: “If you only make the minimum payments, $ 5,000 of credit card debt at 16% can keep you in debt for over 15 years and cost you over $ 5,400 in interest. Your minimum payment will start at $ 117. If you get a 5-year personal loan at 6%, you will pay about $ 97 a month and be free from debt in 5 years with a total interest bill of $ 800, ”says Ted Rossman, senior industry analyst at the company. Bank rate as well as CreditCards.com… His conclusion: “If you can qualify for a lower rate than the alternatives, a personal loan can be an attractive way to consolidate credit card debt, medical debt, finance your business, or improve your home.” Compare personal loan rates here.

However, loans to individuals have no pitfalls. These are unsecured debts, so you can pay more interest than, say, a car loan or mortgage, says Lauren Anastasio, a certified financial planner at the company. SoFi “And of course, the better the rates you get, the better your credit rating and debt-to-income ratio,” she adds. You should also keep an eye on creation fees, says Annie Millerburnd, personal loans expert at NerdWallet. She explains that they can range from 1% to 6% of the loan amount depending on your loan, or it can be a one-time flat rate.

5 things you can pay off with a loan:
  1. To pay off credit card debt
    Rossman says a personal loan can be an attractive way to consolidate credit card debt. “The rates on personal loans can be lower than on credit cards, especially if you have good credit and they offer a fixed payback period, while credit card debt can potentially stretch out for decades and accumulate a lot of interest,” says Rossman. Compare personal loan rates here.

  2. Pay off medical debt
    Some hospitals and doctors offer long payback periods with low or no interest rates, which would make these plans better options than personal loans. “But if you pay a higher rate for the health care rate and can’t negotiate a lower rate, you might need a personal loan,” says Rossman.

  3. To recoup a large purchase, such as a home renovation, needs to be done as soon as possible.
    Millerburn says personal loans are good for home improvement projects that you want to get started quickly, like roof renovations, because you can usually go from application to funding in a week or less. “You can use a personal loan to renovate your bathroom or kitchen, but HELOC and home loans are likely to have lower interest rates, so it might be worth waiting a few extra weeks to see the money in your account,” says Millerbernd. But personal loans for home renovations have another advantage, Rossman adds: “You certainly have to pay back personal loans, but the consequences are not as severe as defaulting on mortgages, home equity loans or HELOCs.” Compare personal loan rates here.

  4. Business financing “Private loans are easier to obtain than small business loans. This is especially true if you are just starting out and you don’t have a lot of business income, ”says Rossman. And if you have a good credit history, loans to individuals can charge much lower interest rates than corporate and personal credit cards, which average 14.22% and 16.4%, according to CreditCards.com.

  1. Refinancing Private Student Loans “Refinancing private student loans with a personal loan might make sense, but I would not recommend it for federal student loans because they have more generous leniency and forgiveness policies,” says Rossman. To figure this out, you simply look at the rate you pay on your private loans versus the rate you might receive on your personal loans, as well as the processing fees, application fees (if any), and any protections and benefits that come. with a student loan. Compare personal loan rates here.

3 things you shouldn’t take a personal loan for:
  1. Shopping with better loan options, such as study, car, or real estate.
    Anastasio says personal loans should be avoided to fund purchases for which there are more suitable borrowing options. “Examples include funding a school or education expenses with a personal loan instead of a student loan, buying a car when a car loan is available, or real estate when a mortgage would be a better choice,” says Anastasio.

  2. Discretionary purchases like vacations or retail gobblers.
    Personal loans are too large a commitment and costly for short-term, discretionary purchases. “Avoid personal loans for frivolous expenses that you cannot afford. You might really want to take a beach vacation, and you might be able to get money from a lender, but that doesn’t mean getting a personal loan is a good idea, ”says Matt Schultz, chief credit analyst at LendingTree.

  1. Wedding
    As with vacations and high-priced tickets, Millerburn says, “A personal loan may have a lower interest rate than your credit card, but this is one of those times when you’d better adjust your budget or postpone so you can pay in cash. funds.” Also see: 8 things to consider before refinancing your mortgage

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