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What Is a Personal Loan?

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Here’s Everything You Need to Know About Personal Loans and How They Work.

Happy couple using laptop to learn about personal loans

Personal Loans can help pay for medical bills, home improvements, and more

A Personal loan is a form of credit that you can use to consolidate debt or make a large purchase.

As you research different financial debt alternatives you might be asking yourself “What is a personal loan?” Personal loans offer a way to get out of debt, if used responsibly. More people are taking advantage of personal borrowing options as their number grows nationwide in popularity with Experian reporting 42.7 million personal loan accounts as of 2020. In the past, personal loans were considered a desperate measure for people who had exhausted all other options. However today’s economic climate has made personal loans an attractive alternative over the more traditional methods of debt relief.

With the right terms and interest rate, a personal loan can provide a way to pay medical bills, fund home improvements, and refinance existing loans. Before you apply for a loan make sure you do your research. The good news is that LoanForSuccess can assist. This article will address all of your personal loan concerns, such as:

  • What is a personal loan?
  • What is the most common reason for getting a personal loan?
  • Which types of personal loans are there?
  • How do I get a personal loan?
  • What personal loan terms should I know?
  • Is a personal loan right for me?

Ways to Use a Personal Loan

Taking out a personal loan may be a good idea to pay off debt, fund major purchases, or plan a dream wedding, but be sure to consider the costs involved.

You can use a personal loan for a number of purposes, including:

  • Consolidating debt
  • to cover emergency expenses
  • Home Improvements
  • Traveling and vacations
  • Wedding costs
  • Medical bills
  • Other large purchases

According to Experian, the most popular reasons for obtaining a personal loan are (26%) paying off credit card debt and (28%) funding large purchases.

What Is a Personal Loan?

A Personal loan is a form of credit that you can use to consolidate debt or make a large purchase. The rates and fees for personal loans are often low compared to credit card fees, and they come with easy payment terms that enable you to make one payment per month.

Emergency loans are a type of personal loan meant to cover unexpected expenses and emergencies. For Instance, A personal emergency loan can provide funds fast if you or a loved one suffer from a medical condition that requires immediate treatment but is not covered by insurance. These emergency funds are designed specifically with this purpose in mind and they’re available when needed most.

The Different Types of Personal Loans

Personal loans come in many varieties, but it doesn’t have to be complicated to understand them. Below, we explain the differences between:

  1. unsecured loans and secured loans
  2. Online loans and traditional loans
  3. Fixed-interest loans and variable-interest loans

Secured Loans vs. Unsecured Loans

Secured loans, in which you have to put up something like your home or car as collateral, are also known as collateral loans. On the other hand, collateral-free loans are known as unsecured loans.

If you are unable to meet the minimum requirements for borrowing due to credit history or income, collateral may be required. When you default on a secured loan, your assets may be taken by the lender and sold to recoup the debt.

What happens when you default on a loan?

Personal loans are typically unsecured, which means there is no requirement for collateral. Although an unsecured personal loan won’t put your house or car at risk, defaulting still has consequences. For example, your credit score may suffer (which may affect future borrowing opportunities). Or, Your debt will be taken over by a collection company and they will try to collect it.

As a result, before getting a loan, it is important to verify that you can afford your payments.

Online Loans vs. Traditional Loans

Traditional Loans

A traditional loan involves working in person with the lender. In addition to providing physical paperwork and requiring signatures, this provides multiple face-to-face contacts for all parties involved during the application process.

This type of loan requires you to meet with potential lenders at every stage. This includes reviewing applications, statements, tax returns, and other necessary documentation before you decide whether to take out a loan.

Online Loans

An online personal loan is like a traditional personal loan in that you borrow money and agree to pay it back under the terms the lender outlines. The difference is that you submit documentation, receive approval, and sign all documents online. Not only are online loans convenient, but they also tend to pay out quicker than traditional loans.

Online Personal loans are similar to traditional loans in that you agree to borrow money and make payments according to the conditions laid out by your lender. The key distinction between traditional and online personal loans is that you complete paperwork, receive approval, and sign papers all through the internet. Because everything is done over the internet, approval, and funding are generally faster than with traditional lenders.

Fixed vs. Variable Interest Loans

The key to finding the right loan for yourself is understanding how interest rates work.

With a fixed-rate personal loan you will pay the same amount every month. Variable interest rate loans usually have a lower interest rate compared to the rate of a fixed loan. Loans with variable interest do not have a set amount due in payment every month, like fixed-rate loans. Your payment Each month on a personal variable interest loan can change depending on market conditions and the Prime Rate.

How to Determine Whether You Qualify for a Personal Loan

Now that you have an understanding of personal loans in general, the next step is to determine if you qualify for one. The following steps can help you determine if you are eligible for a loan.

1. Find Out What Your Credit Score Is

Your creditworthiness is the most important factor in determining:

  • Eligibility for a personal loan
  • Loan amount
  • How much interest you’ll pay

Before applying for a personal loan, obtain a copy of your credit report to ensure the information is correct.

2. Calculate How Much You Need to Borrow

Before applying for a personal loan, determine how much you need to borrow and for how long you want to make payments. It’s helpful to have a financial plan not only for taking out a loan but for the next few years while you pay it off.

3. Know Your Budget

You may want to borrow a certain amount, but if the payments on that size of a loan are more than you can afford, you likely won’t be approved. (Nor would it be a good idea financially.) Before you begin the loan process, make a budget. Doing so will help you determine the monthly payment you can comfortably afford.

4. Research Your Personal Loan Options

Not all lenders offer the same terms and conditions, customer service or convenience. Do your homework to find the best terms, rates and loans for your situation, and be sure to choose a reputable lender. Find out how LoanForSuccess can help you get the personal loan you need today.

Not all lenders offer the same terms and conditions, customer service or convenience. Do your research to find a reputable lender that can help you get the loan you need today.

LoanForSuccess is one of America’s top personal loans providers for people with imperfect credit history. With a large network of lenders, LoanForSuccess can help you eliminate high-interest debt, pay off your credit cards, or make large purchases. Checking your Loan Options is quick, easy, and doesn’t affect your credit score.

Is a Personal Loan Right for You?

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Checking your personal Loan options with LoanForSuccess won’t affect your credit score and is 100% Free.

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Important Disclosures. Please Read Carefully.

Online Payday is not a lender and does not make credit decisions. Onlinepayday.us connects interested persons with a lender from its network of approved lenders. Onlinepayday.us does not control and is not responsible for the actions or inactions of any lender, is not an agent, representative or broker of any lender, and does not endorse any lender. All loan approval decisions and terms are determined by the loan providers at the time of your application with them. The time to receive loan proceeds varies among lenders, and in some circumstances faxing of application materials and other documents may be required. Submitting your information online does not guarantee that you will be approved for a loan. You may exit the process at any step as you are under no obligation to accept the loan presented. For details on your loan please contact your lender directly. This service is not available in all states. Residents of Arkansas, New York, Vermont and West Virginia are not eligible to use the service to request a loan. By using this website or services, you represent and warrant that you are at least 18 years old, that you are a resident of the United States, and that you are not a resident of any state where the loan you are applying for is illegal. In some cases, you may be given the option of obtaining a loan from a tribal lender. Tribal lenders are subject to tribal and certain federal laws while being immune from state law including usury caps. If you are connected to a tribal lender, please understand that the tribal lender’s rates and fees may be higher than state-licensed lenders. Additionally, tribal lenders may require you to agree to resolve any disputes in a tribal jurisdiction. You are urged to read and understand the terms of any loan offered by any lender, whether tribal or state-licensed, and to reject any particular loan offer that you cannot afford to repay or that includes terms that are not acceptable to you. Onlinepayday.us does not pull your credit or look at your creditworthiness, but responsible lenders will. By submitting your information to Onlinepayday.us, you are giving lenders in Onlinepayday.us’s network permission to verify your social security number, driver license number or other identification, and to review your creditworthiness by pulling your credit history from major credit bureaus as well as from alternative credit bureaus such as Teletrack or DP Bureau. Onlinepayday.us receives compensation from its lenders based on advertising services. Onlinepayday.us is a free service and will never charge a fee to be connected to a lender.

Representative Example

If you borrow $5,000 and the loan has an 8% origination fee ($400), on a 48 month repayment term at a 19.25% APR, the monthly repayment will be $134.16. Total repayment will be $6,439.50. Total interest paid will be $1,039.50.

Important Information

Onlinepayday.us is unable to supply you with an exact APR (Annual Percentage Rate) that you will be charged if you are approved for a loan. APRs depend on multiple factors, including the lender’s requirements and offers, your credit worthiness, your state of residence, and the type and term of the loan you request. You will be given the details on the APR, loan fees, and other terms by your lender when you are redirected to your loan agreement during the loan request process. The lenders and lending partners we work with offer 61-day to 84-month loan terms with an APR range of 5.99% to 35.99% depending on how the APR is calculated, the duration of the loan, loan fees incurred, late payment fees, non-payment fees, loan renewal actions, and other factors. Loans from a state that has no limiting laws or loans from a bank not governed by state laws may have an even higher APR. Keep in mind that the APR range is not your finance charge and your finance charge will be disclosed later on. Some states cap APR and the amounts of charges for an online personal loan. Loan terms may range from 2 weeks to 84 months depending on your loan and the lender you are connected with.

Implications of Late and Non Payment

Your lender may charge you late fees as well as fees for non-sufficient funds. Please review your loan agreement carefully for information about the financial implications of non-payment before you provide your electronic signature. Non-payment may involve debt collection practices as it is set by applicable law. Your lender may set late payment fees in accordance with state regulations. Lenders are within their rights to report your failure to repay a loan to one or all of the major credit reporting agencies — Experian, Equifax. After the lenders receive payment in full, they can report it to the credit reporting agencies. We remind that late payment or non-payment of your loan can have negative impact on your credit history. Some of the lenders in our network may automatically renew your short term loan if it becomes past due. This term is clearly identified in your loan agreement. You should check your loan agreement for your lender’s policy on automatic loan renewal prior to e-signing it. If your loan is renewed, there will be additional charges as determined by your lender, and the minimum term can be set up. Your lender may offer you other options in addition to renewal, including the ability to repay your loan in full at a later date or repay your loan over time in a series of installment. You are encouraged to contact your lender as soon as possible if you are unable to repay your loan on the scheduled repayment date or make regular installment payment on time. For more information about your lender’s specific procedures as they apply to late payments, please review your loan agreement or contact your lender directly. Origination, documentation and other additional fees may apply to your online personal loan deal. Late payment, non-payment fees and other penalties may apply to both short term and online personal loan deals in case of missed payments. Please review your loan agreement carefully for information about the financial implications before you provide your electronic signature.

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