Do you have immediate access to $1,000 in the event something goes terribly wrong?
If not, you’re far from being alone. Over 65% of all Americans would struggle with quickly accessing $1,000 to pay for an emergency situation.
Keeping your personal finances in tip-top shape is no easy task. Even when you pay close attention to your budget, unexpected expenses still come up.
Since most people can benefit from access to extra money, there are a number of available options. One of those options is a personal loan.
The way a personal loan provider operates can vary a lot. So before you move forward with this option, it’s important to know what to look for, as well as what to avoid.
The Basics of Personal Loans
Like other types of loans, a personal loan is a specific amount you borrow from a lender. After borrowing this money, you’re responsible for paying it back over a set amount of time.
While many personal loans have a fixed interest rate, be sure to carefully check before taking one out. Part of what makes personal loans appealing is you can use them in many different ones.
People with debt spread across multiple sources may use this loan as a consolidation tool. It can also be used for a wedding ceremony or home remodeling project. You can even use a personal loan to help fund a new business.
Evaluating a Bank Loan
Banks may be the first loan provider many people think of for this type of financing. Although most banks do offer personal loans, they may not have the best terms.
An important term to look at as you’re evaluating different loans is whether options are unsecured or secured. The difference between these two loan types is a secured option requires you to put up collateral in the event you don’t pay back the loan.
How to Evaluate Loan Fees
Fees should play a key role in your evaluation of different personal loans. Origination fees are commonly associated with loans in this category. This fee can add up to as much as 4.5% of the loan value.
There’s also the possibility of a loan carrying a prepayment penalty. This penalty will result in you being subject to an extra fee for paying off your loan early.
A prepayment penalty doesn’t automatically mean a specific personal loan isn’t right for you. Just be aware that the penalty exists so you don’t end up paying the fee.
It’s common to feel overwhelmed as you compare multiple personal loans. Using the total amount repayable (TAR) is helpful to keep your evaluation methods consistent.
Finding the Right Personal Loan Provider
Along with interest rates, fees, and TAR, your credit will play a significant role as you consider different personal loan providers. A common misconception is these loans aren’t available to individuals with bad credit.
In reality, there are lenders who understand that life is more complicated than what’s reflected in credit scores. These loan providers can help you secure up to $5,000 in spite of a bad credit.
You can look at Bonsai Finance installment loans bad credit to see exactly what this type of loan provider has to offer. A unique feature of this provider is loan amounts aren’t paid in one sum.
Instead, they are broken into regular installment payments. These payments are then made on a bi-weekly or monthly basis. This innovative model allows an installment loan provider to help individuals with bad credit.
Installment loans are also a tool for improving your credit score. All you have to do is make consistent payments. An added benefit of this loan structure is the ability to minimize the amount of interest you have to pay.
Additional Information About Installment Loans
The unique structure of installment loans offers several advantages. One is that most installment lenders don’t even run credit checks. Another is favorable terms.
Those terms include options in regards to the loan’s duration. Not only can paying back this loan build credit, but the loan can be used to avoid other missed payments.
As long as you have a valid US bank account, the approval process by a loan provider can take less than five minutes. Once approved, you will likely receive the first installment by the next business day.
Taking Control of Your Finances
A personal loan provides a way to improve your personal finances. There are a few steps you can take to make the most of this opportunity. The first is to know how much you’re actually spending every month.
Once you know your exact expenses, you can create a budget. Your budget should focus on spending less than you earn. Eliminating unnecessary expenses will allow you to start saving money.
During this stage, look for ways to pay less for expenses you can’t avoid. For example, getting all your insurance from one provider can lead to meaningful discounts. The same can be true for exploring different cell phone plans.
Another important step in this process is tackling your debt. A popular method is to identify which source of debt has the highest interest rate. You can then focus on paying it off.
After you pay off one source of debt, move to the one with the next highest interest rate. This will allow you to minimize the amount of total interest you pay.
You can also look into ways to make a little extra money. From selling your old stuff on eBay to participating in online surveys, bringing in more money will allow you to knock out your debt in less time.
Use The Right Tools to Succeed
It’s a good idea to use financial tools along the way. There are free online options for tracking your spending and monitoring your budget. It’s also smart to keep an idea on your credit score.
Getting your finances under control can take time. Even though small changes may not seem significant, their impact will add up. Being able to save $50 or $100 a month is better than nothing.
Strategically using a personal loan can improve your overall financial situation. If you want additional help getting your finances on the right track, consider working with a financial planning professional.