Personal expenses can occasionally be more that the savings and income. There are varied occasions where you may encounter needed or unexpected expenses that exceed your income or the current balance in your bank account. Maybe you need to pay for medical bills, or pay for some special occasion, or your credit card interest rates are sky-high. Personal loans can be really helpful during such times and help fill the cash gap. You may use your personal loan to consolidate your debts, make home improvements, pay for major purchases, make payments for unexpected expenses, or even to enhance your credit.
Personal loans can be used for meeting any kind of expense and for almost any purpose. You can avail of personal loans ranging from $1,000 to $50,000 in just a few days.
Things to know about personal loans
- Personal loans get quickly approved for individuals with decent credit. In case you do not meet the qualification criteria when you apply for a personal loan for the first time, then you may better your credit score, over time, by timely payment of bills, reducing debt, perusing and rectifying your spending habits, and correcting any errors in your credit report.
- Shop around, check and compare the fees and interest rates offered by different personal loan lenders, and select one that offers the best rates and terms with the lowest fees. Go for a short-term personal loan as long-term personal loans for the same amount come with higher interest rates and fees.
- Even though lenders do not impose any restrictions on where borrowers can spend their personal loan funds, it is important to use the money for the purpose that it was taken for. Do not take out a personal loan that is not going to offer long-term benefits such as for an opulent dream wedding, a big birthday bash, or purchasing expensive clothes.
- As personal loans are usually unsecured loans, i.e., burrowers do not have to provide any collateral or keep a security deposit, the risk of the lender is much higher. Consequently, personal loans come with higher interest rates as compared to secured loans. Additionally, people with higher credit scores will get a lower interest rate, while those with low credit score may qualify only with a higher interest rate or may not qualify. Additionally, most lenders charge origination and other kinds of fees for personal loans.
Personal loans for improving the credit score
Personal loans can help borrowers improve or build their credit through the addition of an extra line of credit to the borrowers’ credit report. The lender of personal loan will report the monthly repayments of the borrower to all the three major credit bureaus, viz., Experian, Equifax, and TransUnion.
It is important for borrowers to ensure that they make all the personal loan repayments on time to improve their credit. They should never miss even one payment. With timely, consistent repayments, borrowers will begin to see gradual improvement in their credit score over a period of time.