A personal loan is a type of debt that allows you to borrow money to cover expenses. Unlike credit cards, personal loans typically come with fixed interest rates and a set monthly payment. You can use a personal loan to pay for debt consolidation, medical bills, home improvement projects, vacations and other discretionary spending.
Before you apply for a personal loan, consider your financial situation and carefully review the terms offered by lenders. Several factors can influence your eligibility, including credit score, income and whether you want to put up collateral. The best personal loan offers go to borrowers with excellent credit, long histories of on-time payments and a low debt-to-income ratio. If your credit score could stand to improve, consider taking steps to do so before applying.
It’s important to compare lenders for personal loan rates and fees, as these can vary widely. Look for a lender that provides unique perks, such as zero-fee loans or autopay discounts, to help save you money over the life of your loan. You can also ask lenders about their minimum and maximum loan amounts to ensure the loan is large enough to cover your expenses.
Most lenders require a formal application, which can include verification of identity and income, and a hard credit inquiry. If your credit score is below the lender’s target range, you may face a higher rate or have to provide a cosigner. If this is the case, it may be beneficial to apply with a cosigner to boost your chances of approval and receive a more favorable rate.