56% of Americans say they don’t have at least $1,000 in savings to cover an unexpected expense. Emergency and unexpected expenses pop up in daily life all the time.
So, what do you do when you need money for something and don’t have the cash on hand? Many are turning to fast cash advance loans for emergencies and a variety of other reasons.
A personal loan can get used for several reasons beyond emergencies. How does a personal loan work, and how can you get it approved when needed?
Read on to learn more about personal loans, when you might want one, and how they work.
A personal loan is the type of loan you seek from a lending institution. The need for a personal loan can come from a variety of sources.
When you seek a mortgage, the loan is to cover the purchase of a house, and the house acts as collateral. The same is true of an auto loan, where it’s used to purchase a car, and the car is collateral.
There are many reasons you might seek a personal loan beyond a house or a car ( more on this shortly). Often you get a personal loan based solely on your merits as a borrower without any collateral attached to the loan.
If you want to apply for a personal loan, you must decide on a lender. You might use a bank or credit union. Many people look to online lenders for fast and easy personal loans where everything can get handled digitally.
First, you must complete the required application that all loans have. You’ll want to know where you stand with your credit.
Check your credit and review your credit report so you’re familiar with what lenders will see when they check it through the application process.
Generally, the better your credit score and credit history look, the better the terms you’ll get on your loan. Since often, there isn’t collaterally connected to a personal loan; the lender will want to see if you can afford to make the payments on the loan.
With an online lender, once the loan is approved, your funds are deposited directly into your account.
People often run short of funds. Emergencies arise, or there’s a significant expense that you want to pay off over time. Be prepared for a lender to ask why you might want a loan.
They want to know you’re making a wise choice and have the ability to pay it back.
Let’s take a closer look at some of the most common reasons you might seek a personal loan.
One of the most common reasons to seek a personal loan is to help pay off debt. Now, getting a loan to get rid of debt might not make sense.
Many like the idea of consolidating debts into one monthly payment. Sometimes, you can get a personal loan with a better interest rate than is available on multiple credit cards, so you can save by doing the debt consolidation.
You may have a home renovation project on the horizon that needs a larger chunk of cash upfront. Some people don’t have equity in their homes for a home equity line of credit or a home equity loan.
You can complete a more costly home renovation without waiting to build up the equity in your home. Remember, too, that a personal loan is often unsecured, which means you won’t need to use your home as collateral for the loan.
The reality is that moving is expensive, even if you’re making a local move. If you paid out deposits for a new place to live, you might be short of cash to cover all the extras that are part of a big move.
Sometimes you find yourself in a situation where you’re moving unexpectedly, and you don’t have time to plan or save for the associated costs of a move.
Life is full of emergencies that can fumble even the best planner.
You may be faced with planning and paying for a funeral you didn’t expect. The average cost of a simple funeral is close to $8,000.
You may have an ill or injured family member facing mounting medical bills. Getting a personal loan can help to cover these completely unexpected emergency expenses.
Like the emergencies above, sometimes you find it’s necessary to spend money on a costly item. You may not have the savings to cover it, yet you still need it done.
The transmission on your car may have blown and needs repair. You can’t care for your family or get to work without your car.
Your washer might have just died when you have a house full of messy kids. Spending a fortune week after week at the laundromat doesn’t make sense. You need to purchase a new washer.
Not all expenses carry a negative connotation. You might be busy planning the most memorable day of your life. Even if you’ve been planning this day in your head for years and years, you might not have the savings that go with it.
Planning a wedding requires a host of deposits for the flowers, the reception, and the photographer. A personal loan helps to cover the expenses and allows you to pay them back over time.
Do you ever find yourself thinking I need a vacation? Maybe the option of an unexpected vacation opportunity presents itself.
If you take out a personal loan for your vacation, even for vacation deposits, you’ll have the luxury of paying it back over time.
If you’re planning a particularly special vacation for an anniversary or a big celebration, you might need the extra funds for this extra memorable vacation.
You might want to seek a personal loan for certain kinds of auto financing or a recreational vehicle like a boat or motorcycle.
If you’re buying a car from an individual versus a dealership that offers to finance, this might be the most straightforward option since you can seek funds and pay for the vehicle directly.
Emergencies can happen with your home or automobile all the time. Perhaps you’ve just experienced a bad storm, and your landscaping, yard, and fencing are torn up. Maybe you have roof damage.
You might have a plumbing problem that caused water damage in another part of your home.
You might be the most careful car owner, doing all the appropriate maintenance, and still find yourself with an expensive car repair. Suddenly the wheel bearing on your truck is bad, or you need a new fuel filter.
If you don’t have the savings or don’t want to burn through all your emergency savings, a personal loan can help you weather these types of emergencies.
If you hope to get a personal loan for any of the reasons above and want to do it responsibly, then you need to understand how the loan works.
Let’s take a closer look at the most common loan terminology, so you understand how your loan will be arranged.
You may hear your lender use the term principal when referring to your loan amount. The principal is the actual amount of money you’re borrowing with the personal loan.
Of course, when you repay the loan, you’ll pay more than the principal because of the other costs connected to the loan.
The interest is the amount the lender is charging you because they are lending you the money. It’s how lenders make money and what makes it worth granting loans.
Interest rates can vary from lender to lender. They can also vary greatly depending on your credit score and history.
If you have some scars on your credit history or a lower credit score, you’ll pay more in interest because you’re a higher-risk borrower.
One concern you’ll have related to your personal loan is the loan payments. How much will they be, and when are they due?
The loan terms spell out exactly how long you have to pay back the personal loan, including the principal and interest.
It will cost you more than just the principal amount to borrow money. You know you pay interest on the loan amount too.
When you seek a loan, it’s smart to consider the APR or annual percentage rate. This number will give you a more accurate picture of precisely what the cost of the loan will be.
APR includes the principal, interest, and any additional fees the lender may charge.
You might choose to seek a fast cash advance loan for many good reasons. It can be beneficial if you get the loan for a good reason and pay it back responsibly.
To be a responsible borrower, you need to understand the terms of your loan and what it will ultimately cost you to get the loan.
If you’re interested in seeking a personal loan, we can help. Contact us today to learn more about personal loans and to see what you qualify to borrow.