6 Questions to Ask before Taking Out a Personal Loan

There are numerous solutions available if you’re in need of immediate financial assistance. One of the most efficient ones is a personal loan. However, planning to get one requires a little research on your part. After all, applying for a personal loan can have an effect on your credit rating, which can influence a lot of the things in your life.

Before you take out a personal loan, here are some questions you must ask and the answers that can help you make the best decision.

What is a Personal Loan?

A personal loan is a short-term, fixed loan that gives you instant access to cash to fulfill a financial goal or emergency. It is unsecured, which means that you do not need to offer anything as collateral to receive a loan.

What Makes a Personal Loan Different from Other Loan Types?

Mortgages, business loans, and car loans are all secured loans. These loans require expert witnesses and are almost always fulfilled by going to a bank or another type of financial institution. These loans are still available from banks, but they are harder to acquire, especially for the average person.

On the other hand, personal loans are fast, easy, and accessible. Not only that, but you can get through the application process in just a few minutes and get your money the next day.

What Factors Affect How Much You Can Borrow?

The most important thing to consider when taking out a personal loan is your credit score. Even if you have been in credit card debt for the past five years, you can still take out a personal loan. However, the fewer debt you have, the higher your credit score will be.

Aside from your credit score, the lender will also look at your income. Lenders will expect you to earn at least the minimum wage in the state or area where you live. Your income will also be used to determine the amount of loan you can receive.

What Are the Types of Personal Loans?

There are several types of personal loans available on the market today. They include:

  • Installment Loans – These loans consist of a set number of payments that you make over a set period of time. This type of loan is best for people with higher incomes and good credit scores.
  • Balance Transfer Loans – Balance transfer loans give you the option to transfer your existing credit card balance to a new card. This type of loan is most ideal for people who have a bad credit score or pay high interest rates. This way, you’ll only need to pay off a single, lower-interest loan.
  • Unsecured Loans – This is the most common type of personal loan that does not require you to use anything as collateral. This type of loan will come with a number of different terms and conditions to follow, especially if you want a better credit rating.

How Much Can You Get from a Personal Loan?

The amount of a personal loan varies by lender. However, it is always determined by your credit score and your income. The higher your income and credit score, the greater amount of money you can borrow. Generally, you can borrow a maximum of $35,000 or $50,000 depending on the lender.

Is It Possible to Pay Off a Personal Loan Early?

A personal loan usually comes with a repayment period of between 12 and 60 months. You can pay it off early if you want to, although most lenders will charge you a pre-payment penalty.

This penalty is usually 0.25% of the outstanding balance, so consider which method allows you to save more when you think about repayments.

Final Thoughts

A personal loan is a great way to pay for your immediate necessities. It will not only allow you to get what you need right away. It will also give you access to funds that will allow you to create a solid financial plan for the future, which is what everybody needs.

If you are looking for a reliable ,personal loan company in Memphis, TN, work with us at Shelby Finance Company. Whether you are working on rebuilding credit, consolidating your debt, or looking for an emergency solution, our borrowing process can help you. Give us a call today at 901-586-0847 and let’s discuss how we can help you.