Personal Loans Blog and Resources

If you've done any research about personal loans or if you know someone who has had this type of loan (perhaps you have had one yourself), you likely know that the money from these can be used for virtually anything you want or need. And that includes paying off debt. Using a loan to pay off other loans or lines of credit? Sound crazy? Actually, this is quite common, and some consider it to be very wise. Let's explain. Take, for example, a person who has accumulated some steep credit card debt. Making the minimum monthly payment will never be sufficient if you hope to pay off the card, especially considering the high interest rates. But if you were to be granted a personal loan for an amount equal to or greater than your credit card balance, you could take that money, pay off the card and then work on paying off the personal loan. Some may wonder if this method is wise. Is paying off debt with more debt economically smart? Remember that interest rates on credit cards usually hover around 20 percent. At the same time, personal loan rates-while higher than mortgage rates-are almost always lower. Of course, if you have a poor credit score, a lender might approve a personal loan at a much higher rate. But provided you have good credit, you can expect your personal loan rate to be in the 10 percent neighborhood. Given this scenario, it makes complete sense to pay off the high-interest credit card with a lower-interest personal loan. It doesn't take a mathematician to understand how this could save you time and money. Why not pay off a $10,000 credit card-that would otherwise take you years to pay off-with your personal loan, which you will pay off in three to five years? One caution is that if you have particularly large credit debt-say, in the $25,000-plus range-your personal loan might not cover the full amount. Some lenders cap off personal loans at $10,000-$15,000. Also, be certain that you can indeed pay off the personal loan. It won't do you a whole lot of good to get rid of the credit card only to be strapped with a large personal loan you're incapable of managing.    

Are you considering a personal loan? Are you worried about how applying for or borrowing a personal loan will affect your credit? That is certainly a valid concern. Spoiler: It does. In America, it can feel like credit is the king, judge, and executioner. Almost all financial decisions you make either depend on your credit or affect it. To get to the bottom of this, we asked personal finance experts for advice about how and when a personal loan affects your credit, both in the short term and long term.  Credit score recap Your credit score is critical when determining your personal loan eligibility. It provides lenders a snapshot of your spending habits and history of repaying financial obligations. A lower credit score is a red flag and signals a risk to the lender that an applicant might not have the means to fulfill his or her monthly repayment obligations with the loan. Conversely, a good credit score gives the lender confidence that you will make on-time payments every month. To start, let's recap about general credit scoring, with the help of Lisa Johanning, Vice President of Consumer Lending at Axiom Bank, N.A. She says, "Payment history has the highest impact on your score, so being on time with your payments has the highest positive impact on your score (35 percent). This is followed by amounts owed (30 percent), length of credit history (15 percent) and credit mix (10 percent), which describes what types of accounts make up your credit (installment loans, mortgages and revolving loans, such as credit cards). Requests for new credit (inquiries) only account for 10 percent of the FICO score."  With that basic recap, let's jump into the personal loans. We will cover: Personal loan basics Short-term credit score effects from your personal loan Long-term credit score effects from your personal loan 1. Personal loan basics Personal loans, also known as personal installment loans, are increasingly popular in the lending industry, due to increased accessibility made available by FinTech companies and online lenders.  Annastasia Kamwithi is an editor for Social Fish, a site dedicated to helping millennials take control of their finances. She shares some background on this type of loan: "A personal loan is a type of credit that is usually issued by banks, digital lenders, or credit unions to help you with some immediate needs such as making a big purchase, consolidating your small loans into one, starting a business, etc."  What is the draw to borrow money through a personal loan, as opposed to credit cards or other loans? Personal loans generally have lower interest rates than short-term, payday loans, and even credit cards. While these are most often unsecured personal loans, though some lenders give the option to borrow a secured loan by putting up collateral. Another common factor seen in personal loans is the use of fees like an origination fee, built into the loan's repayment terms, and the total amount that you borrow and have to repay. On top of that, your repayment terms are built around a fixed rate. Meaning, your interest rate, and monthly payments are planned out in advance, to the penny, for the entire loan term. Your annual percentage rate (APR) won't change with fixed-rate loans. This is in contrast to most credit card accounts, which have a variable rate, depending on the market and financial institution.  "The reason to get a personal loan is that you have credit card debt or other high-interest rate debt that you want to get rid of," explains Jake Sensiba, Financial Advisor for CRG Financial Services, Inc. He's right. Debt consolidation loans are a big deal. More than half of personal loans are taken out to consolidate or manage existing debt like high-interest credit card debt. The rest of the top five reasons that people get a personal loan are varied:  Debt consolidation Home improvement Educational expenses Starting a business Medical expenses "Most personal loans," continues Sensiba, "though it depends on your credit score, offer lower rates of interest than credit cards. You save money on the interest. That's the draw." Especially when you are using it as a consolidation loan to pay off a high-interest revolving credit card balance.  However, he warns, "Individuals with lower credit scores will get less favorable terms (interest rates)." This is especially true for those of us with "not good credit" who are just able to meet a lender's minimum credit score requirements. What else is new? Personal loan pre-qualification When you are looking into a personal loan, you should know that many lenders offer to do a preliminary check to see what kind of rates you may be eligible for, including your loan amounts and loan terms. "In general," explains Freddie Huynh, Vice President of credit risk analytics for Freedom Financial Network, "when someone calls an independent lender to inquire about a personal loan and wants to check rates, that involves only a soft credit check. Soft inquiries are inquiries that do not affect credit reports or scores. They happen when you check your own credit reports or when a company check your credit reports for background/reference." While "Most lenders will pre-qualify you for a personal loan by doing a soft credit check," warns Kamwithi, "Some lenders, however, will not do a soft-check. Therefore, ensure you look for one that does this, as it SHALL NOT AFFECT YOUR CREDIT SCORE." Look for wording like:  check rates with no impact to credit score pre-qualify for a personal loan without affecting your credit score check your rate in minutes for free, without hurting your credit score checking rates won't affect your credit checking your rate will not affect your credit score soft credit pull soft credit check soft credit inquiry see if you qualify in minutes!  no commitment — get your rate and monthly payment with no impact to your credit. check your rate online with no impact to your credit score find out if you prequalify for a personal loan without hurting your credit score. this does not affect your credit score! won't impact your credit score! When you are shopping for rates, if you don't see buzzwords like these, ask questions. You don't want to have an unnecessary, negative impact on your credit score.  Personal loan application "Compared to loan pre-qualification, actually applying for a personal loan is a whole different ball game," explains Kamwithi. "When you apply for a personal loan, it will trigger a hard credit check." It's important to be aware that the very act of applying for a loan will have a direct impact on your credit.  Let's check out the different ways that applying for a personal loan can affect your credit score in the short-term. We will break this down into the different credit score factors (as listed in the graphic above).    2. Short-term effects of a personal loan  Payment history "As far as credit history," advises Jason Orlicek, Senior Vice President and Loan Manager for Signature Bank of Arkansas, "you must actually open a new loan account to create a new ‘history' item and then your ability to make payments on time will follow and have a more long-term effect on your score. There is a balance between having enough credit and too much."  Opening a new personal loan helps to establish more payment history, but you will see this impact in the long term, rather than an immediate boost to your credit score.  Amounts owed "Having a higher percentage of available credit used (credit cards, lines of credit) typically decreases the score," adds Orlicek. If you are using the new loan to consolidate debt, this can affect your score by reducing your utilization ratio.  As Huynh explains, "One area in which a personal loan can have a positive impact on credit is when a consumer uses it to consolidate and eliminate credit card debt. Along with the greater simplicity of making just one monthly payment, personal loan interest rates are generally a bit lower than credit card interest rates. Some personal loan lenders even offer a discounted rate if you use the proceeds to repay credit card debt and transfer the loan proceeds directly to creditors." "Consolidating all of your personal debts can help in improving your credit by lowering your credit utilization," explains Kamwithi. "Your credit utilization ratio refers to the amount of credit available for you to use." Length of credit history "Opening a new credit account lowers your average credit age," explains Sensiba. "Older credit accounts are better for your score." Charlie Scanlon, President of Phoenix Credit Consultants explains how this works: "The loan, if approved, can impact your credit score by diluting your credit history, i.e., the average age of the accounts that are reporting on your credit report. The newer account is averaged in with your other accounts.  Let's say you have a single credit card and you have had it for a year. When you add the new loan, it will dilute your credit history's age from a year to six months. As the new loan takes on age, it will help you in this scoring category." However, its immediate effect may be negative if you have few accounts open, especially if they are relatively new.  New credit The New Credit category makes up only about 10 percent of your FICO score. This category is made up of several factors:  Credit inquiries within the last 12 months How long since you opened a new credit account How long since your last credit inquiries were made How many new accounts, by type  How many of your total accounts are new accounts  How many recent inquiries If accounts previously in bad payment standing have recently bounced back According to FICO, "Inquiries remain on your credit report for two years, although FICO® Scores only consider inquiries from the last 12 months. FICO Scores have been carefully designed to count only those inquiries that truly impact credit risk, as not all inquiries are related to credit risk." So, new credit inquiries go straight to your credit report. The real question is: How much do they affect your actual credit score? "Applying for any type of loan will impact your credit, even if minutely," says Mike Scott, Senior Loan Originator at Independent Bank. "Why? When a creditor pulls your credit report, it can lower your credit score, typically by two points. The more inquiries on your report, the lower your score gets." "In the very shortest term," explains Scanlon, "the impact applying for a personal loan will depend upon whether [the lender] runs your credit and whether they obtain your credit from all three of the national credit bureaus or only one of the three. Credit unions, for example, will often only pull your credit from one bureau."  This is important because it's common to have a different FICO score with each of the major bureaus: Equifax, Experian, and TransUnion; and if they only do a hard pull from one credit reporting agency, the hard pull will only affect your score with one of the agencies, not all three.  You should know your credit score before applying for loans. If you are applying for a personal loan with local credit unions, it may be helpful to ask which they pull from, so that you can play to your strengths.  "Every time your credit is pulled, there is typically a small decrease in your credit score in the short term as one of the factors in determining your score is how many times your credit is pulled," explains Orlicek. The effect of the hard inquiry hits you, whether your application is approved or denied.  Johanning explains why: "The reason the credit score drops is based on the theory that as you take on more debt, the odds of failing to repay loans rise. So as the risk rises (more inquiries for credit), the score drops. "  "While it does not affect your credit score much," says Logan Allec, a CPA and owner of personal finance site Money Done Right, "this can add up if you have a lot of hard inquiries." Additionally, "Too many new accounts opened in a short period tends to decrease the score," says Orlicek.  "Be very cautious about applying for multiple loans at the same time," warns Jared Weitz, CEO and Founder of United Capital Source Inc., this will begin to drive your credit score down. After a hard inquiry has been pulled from a credit application, wait six months before applying again to ensure your score has had time to recover. " A hard inquiry doesn't affect everyone equally. Chad Rixse, CRPS®, Director of Financial Planning at Forefront Wealth Partners explains, "In general, hard inquiries are only detrimental to those with spotty credit histories, such as poor payment history, high utilization rates, and limited credit mix. For those with extensive credit histories, on the other hand, a single hard inquiry is unlikely to have any effect at all." Credit mix When it comes to credit mix, a personal loan can be a positive way to add some variety to your credit history.  "If your new loan is a type of account that you don't presently have," Scanlon advises, "it can help your score by adding to your mixture of accounts, or diversity of accounts. If your loan is one that you are paying back in monthly payments, it will likely report as an installment account. This is different from a credit card account, which is a revolving account and will boost your scores because of the additional, new type of borrowing. The credit scoring algorithm likes to see that consumers can manage different types of accounts, therefore it rewards the consumer for having a variety of different types of accounts."  As Allec explains, "If you add a personal loan, then you will increase your score due to a change in a variety of credit. This is a positive benefit of applying for a personal loan, and many people will take out small loans they lend to themselves to vary their credit and increase their score."    3. Long-term effects of a personal loan Just as there are short term effects to your credit report when you apply for and take out a personal loan, there are also long-term effects. These can be good or bad for you and your all-powerful credit score, depending on your behavior.  Payment history "Obviously, the most important thing about a loan when it comes to your credit is repaying the loan in a timely fashion," says Scanlon. "Your payment history, or how timely your bills that report to the credit bureaus are paid, makes up 35 percent of your credit score." This is the category where the most potential benefits of a personal loan are located.  "Most lenders will report your repayment history to all three credit bureaus, i.e., Experian, TransUnion, and Equifax," says Kamwithi. "Having a lender that will report to all of them means that you shall have a more consistent credit report, regardless of which bureau you use for retrieval." This is the biggest opportunity to improve your credit score with a personal loan.  On-time payment It's important to establish a positive record of on-time loan repayment. Huynh elaborates, "If someone takes out a personal loan, making all payments as required, on time, is critical to maintaining and improving credit profiles – just as is the case with any loan (mortgage, car, student loan) or bill (utility, phone, etc.). One effect of making all personal loan payments on time may be a positive impact on credit profiles." Igor Mitic, Co-founder of Fortunly.com adds that this long-term boost to your score is helpful, "Especially if you consolidate debts — such as credit card or auto loans — into one personal loan that you pay consistently over time." Late payment Late payments can have a large impact on your FICO score. Kamwithi explains, "If you are going to miss your personal loan payment by a few days, that will not affect your credit report or score, but if you miss payments with more than 30 days, this will be reported to all the main credit bureaus, and there shall be notable damage to your credit score. " How much damage is possible? Weitz says, "It is possible to go from having excellent credit to a fair credit score (100 point drop) based on 30-day delinquency." On top of that, Scanlon says, "Payments which are 90 days late or more on the loan can do more substantial and longer-lasting damage." Life happens "Late payment on your account in the past 6–12 months will have a much harsher effect than some late payments 4–5 years ago," explains Scott. Sometimes life happens and we make late payments, but "What the bureaus are looking for is the pattern of payment." Amounts owed "The amount of debt one carries directly impacts credit profiles and scores," explains Huynh. "It's explained in terms of percentage utilization (which you want to minimize) and credit available (which you want to maximize).  To explain, if you have a credit card with a limit of $9,000, and you owe $3,000 on it, that's a 33 percent utilization.  Since credit card utilization can play an important part in credit score determination, consumers will be smart to keep credit card balances and utilization low. Therefore, if you can eliminate credit card debt through a personal loan, you should see a positive effect in credit profiles." According to Sensiba, in the long term, personal loans can be good for your credit, "as long as you are responsible. If you get a personal loan to pay off credit card debt and go right back to paying for items with your credit card, it didn't make much sense to do the personal loan then. It can be good because you get rid of the outstanding balance on your credit card, your credit utilization will improve (high-impact), and your debts are consolidated so they'll be easier to manage. " Length of credit history "Accounts that are open less than 12 months tend to pull a score down," explains Scott. "One of the factors impacting a credit score is how long accounts have been established. It is better to have only one account which was open for three years than it is to have ten accounts which were each open for four months. Credit bureaus want to see the LONG-TERM willingness to repay, with the idea that anyone can make a payment for a few months. Once the account has been opened for 12 months or so, the impact on a score tends to be more neutral, and the longer the account stays open, the more it can raise your score, at least if you pay it on time." New credit Once you have had your personal loan open for a year, it is no longer considered in the new credit factor and will likely not have any further impact.  Credit mix If this is the only installment debt on your report, it may hurt your credit score just a bit when repayment is completed and closed, but the positive impact on your current debt balances, and the chance to improve your credit by establishing positive payment history should outweigh this temporary setback.  The bottom line Once you finish paying off an installment loan, like a personal loan, information about the loan and your repayment stays on your credit report for up to ten years; seven years if you made any late payments, and ten if you were in good standing. It can affect you for good or bad, depending on your habits.  It doesn't just disappear when you repay the loan.  So, how do you decide whether a personal loan is right for you?  Mitic suggests, "it's important to weigh the short- and long-term benefits of applying for a personal loan before you apply. If your goal is to build credit, take out a personal loan that you can realistically pay off to increase your eligibility for bigger personal loans and long-term financing options in the future."  Evaluate whether a personal loan is in your best interest or if there are alternative ways to meet your financial needs. If a personal loan does indeed seem like your best option, do plenty of research in advance to ensure the lender you use is right for you.  Check out our personal loan reviews to help in your decision-making process, whether you are looking into borrowing a debt consolidation loan, home improvement loan, or any other type of personal loan.  *Josh McFadden also contributed to this piece.

If you are thinking about getting a loan to meet some of your financial demands, there is much to consider. Aside from the obvious things such as how much you need and what you'll use the funds for, you're concerned with interest rates, payback terms, and what your credit score is. Then there's a little matter concerning secured vs. unsecured loans. Determining whether your loan is a secured loan or an unsecured loan is critical and will have a significant impact on your liability with the loan. As a brief review, secured loans are those connected to a type of collateral such as your home or car. Secured loans come in the form of mortgage loans or auto loans where the property or possession you put up as collateral serve as protection for the lender in case you default on your loan. So, if you fail to make regular payments-or any payments at all-on your secured loan, the lender has a legal right to take possession of the collateral, meaning the home, car, or another piece of property that you put up as collateral. In the case of an unsecured loan, you do not attach collateral to the loan. If you default on an unsecured loan, the lender cannot take away anything you owe. Instead, you're credit will plummet and you could fall into deep debt and find yourself in financial difficulty. Student loans and credit cards are forms of unsecured loans. Personal loans, too, are usually unsecured, which could come as welcome news if you are considered this type of financing for a home improvement project, vacation, wedding, or any other need you see fit. Because your personal loan will almost certainly be unsecured, qualifying for it is contingent upon your credit history and credit score, as well as other financial factors such as debt-to-income ratio and employment status. To obtain an unsecured personal loan, you don't need collateral. This means if you default on the loan, you don't have to worry about losing your home or any of the items you may have purchased with the funds. Be advised, though, if you are unable or unwilling to comply with the terms of your personal loan, your credit score will take a considerable hit, and your ability to qualify for other types of loans-secured or unsecured-will be seriously compromised. Though much more rare, secured personal loans do exist. Most institutions and lenders that offer these require you to use an automobile as collateral. The advantage of obtaining a secured personal loan over the much more common unsecured personal loan is that the secured type comes with a much lower interest rate. So, if the rate is key factor in your decision, a secured personal loan might be a consideration. Also, in most cases, lenders require applicants of secured personal loans to be homeowners.

You may have heard the saying: "Money is the root of all evil." Arguments could be made in favor or in opposition of that assertion. But one undeniable thing is that people need money to survive, and we'd all like to have more of it. These needs and desires can often lead people to resort to questionable tactics to acquire it. Some people engage in criminal, even violent, activities in order to accumulate more wealth. In the business world, it's unfortunately not uncommon to hear about financially unethical behavior such as scams, embezzlement or fraud. And when it comes to managing your money and putting in in the right places, you want to be unmistakably sure that you are partnering with an ethical, honest business. Choosing the right lender is a process everyone should take seriously. It's essential to work with someone you trust implicitly and one you know has your best interests at heart. Your lender should be up-front and truthful and should never be misleading. In addition, there are potentially lenders who may not have unethical or dishonest intentions but simply might not have the reputation, skill, experience or service you need to take care of you and your money. After all, with a lender, you are entrusting a significant amount of time, money and energy to your future and security. You have to make a wise choice. So with all the options available for choosing lenders and financial institutions, how can you be certain you find the one that best suits you? There are a few simple steps to follow. Do these-instead of randomly picking-and will enjoy a positive experience applying for, securing and benefitting from your loan. 1- Use Expert and User Reviews from BestCompany.com. Utilize the countless reviews found in our personal loan section to determine for yourself whether or not a company is legitimate. Our reviews for each company are broken down into aspects of their business that are both good and bad. At the end of the expert review, we provide a recommendation if it is deemed worthy. This is an excellent resource to determine whether or not a company is worth doing business with. To read about the best personal loan companies, view our top recommended suggestions. 2- Conduct a BBB search. The Better Business Bureau is a nonprofit organization that informs the public of companies' trustworthiness and reputability. The organization rates businesses and accredits many. Ratings are given in grade form-F being the lowest, or failure, and A+ being the highest. A business does not have to be accredited to be rated, and accredited businesses don't necessarily garner high marks.The BBB provides free reviews of more than 4 million businesses. The reviews detail what the business does, where it is headquartered, who makes up key leadership, and issues and complaints against the company. As you research different lenders, go the BBB website, type in the lender and read what the BBB has to say. If the assigned grade is low and there have been customer complaints against the business, you might want to think twice about choosing it. The BBB is a tremendous resource for assessing reputability, professionalism, and public perception. 3- Google it. It sounds simple, but typing in the name of the lender or business in a Google search should yield a slew of different review sites. Depending on how large or established the institution is, you could instantly have at your disposal numerous customer and industry reviews of the lender. You'll read what experiences others have had, how fairly they were treated and how knowledgeable the lender was. 4- Ask around. Talk to your family members, neighbors, friends, co-workers and others about the lender or lenders you are considering. See what they link about thee prospective partners. Of course, different people will have had different experiences and opinions, but you can usually get a nice idea about what you'll get yourself into by talking to people. It doesn't take long to conduct some research and do some digging to determine whether the lender is right for you. Many lenders are similar in terms of experience, skill and services offered, so often, the choice can simply be a matter of convenience or personality. But to avoid the pitfalls of financial disaster, take some time and educate yourself.

Need money to finance one of life's many major needs or purchases? Unless you are the fortunate heir to a large sum of money or you find yourself in the enviable position of being independently wealthy, you're probably going to need some help paying for things such as a new home, major home repair, schooling, or major medical need. Thankfully, there is a lender near you ready to help you out. Unless you have very poor credit-or no credit history or stable income- you should be able to qualify for a loan to give you a hand. Whether it's to pay for something you desperately want or need, or whether it's to give you a hand in a big pinch, loans are available to help you. In addition to personal loans, which can help you pay for any number of things, there are a few other types to help you out regardless of your situation of station in life. Here are few besides personal loans: Education/Student loans Remember when you were a child in school and your parents begged you to get good grades? They weren't just saying this so you could achieve something and they could brag to their friends about how smart their kids were. They were hoping you would get a scholarship. And why not? School is expensive. The average undergraduate tuition at a U.S. public university is more than $9,000 a year. A graduate degree can be three or four times as much. If you don't get a scholarship or a qualify for a grant, a loan is the only option for many college-goers. Student loans typically have a low-interest rate and will cover the cost of tuition as well as room and board in many cases. Many student loans are sponsored by the U.S. government; others are privately sponsored. Interest will not accrue while the student is in school, nor will the student have to pay back the loan while enrolled in courses seeking a degree. One key difference between student loans is that they can be granted regardless of credit history or income. This is the source of much criticism. Mortgage loans If you can purchase a home with cash, consider yourself lucky and in the minority. For the rest of us, there are mortgage loans. Mortgage loans are granted based on the applicant's credit history and score, income, and employment status. The rate is predicated based on the these factors, and the terms are usually set in 15- or 30-year periods. Most mortgage loans require a down payment of anywhere between 5 percent and 20 percent. Applicants who can only provide a small down payment often are subject to mortgage insurance, which protects the lender in the event the borrower defaults on the loan. Loan rates are largely subject to market conditions, which can vary greatly from month to month and year to year. Because these loans are secured, the borrower attaches collateral to it, in this case, the property itself. Thus, in the case of a defaulted loan, it is foreclosed and the home is possessed by the lender. Auto loan Auto loan rates are generally a little lower than mortgage loans and are paid back over a three- to six-year term. Again, qualification is based on income and credit. This type of loan is also secured, meaning if you fail to make your payments, the lender can take possession of the automobile. Business loan If you are a small-business owner, you may apply for a business loan to get your business off the ground, to help it grow, or to help build up infrastructure or purchase supplies and equipment. Business loans take into account one's business credit and sometimes even personal credit. Defaults on business loans may result in bankruptcy of the business or even consequences for personal property.

Everyone knows that life can bring surprises; some good and some not so good. Unexpected financial challenges are hardly uncommon. They can come in the form of job loss, major medical needs, or catastrophic event. When these things happen our budgets can be disrupted, if not completely destroyed, and our ability to keep up with bills and other financial obligations is compromised. Often the first thing to be cast aside is paying back loans or credit cards. It's a legitimate, not-so-rare problem: What do you do if your situation has changed since and you can no longer pay back your personal loan?  Worst Case Scenario If you are in a situation with months and months of missed payments behind you then you may be looking at some serious consequences. Below are the three most common consquences that you may face for missing your personal loan payments over an extended period of time: Collection agencies involvement — for multiple missed payments Potential lawsuit to reclaim the borrowed money Loan default — severe credit score & report damage Even if you are months into late payments it is better to try your best and pay anything that you can in an effort to buy more time and flexibility with your personal loan lender. If you find yourself in this less than ideal situation, skipping personal loan payments, there are solutions to help you get out and stay out of the money lending hole: Solution #1 Communicate with your lender If you have fallen into some unfortunate circumstances where you have to choose between buying food (for example) and paying your monthly personal loan payment, your choice is a no-brainer. But don't just forget about the loan. If there is a valid roadblock standing in your way of making your personal loan payments, you don't need to give up hope. The best way to deal with a scenario such as this is definitely not to ignore the predicament and hope no one finds out but to instead contact your lender as soon as possible and discuss the situation. Getting in touch with your lender when the problem first presents itself is crucial. Waiting too long will result in: Accumulated late fees Collection efforts Hits to your credit Beginnings of the default process. It may come as a surprise, but lenders are actually quite willing to work with you when you have difficulties paying back your loan. Most lenders understand that life can throw unforeseen snares in your way, and they will appreciate your proactive approach to the dilemma. Give your financial institution a call and explain what is going on and that you want to figure out a way to work through the difficulties. Solution #2 See if you can renegotiate the terms of the loan A lender is much more likely to be sympathetic to your situation if you make the effort to reach out and ask for help. Though not always possible, many lenders are willing to rework your loan terms to make it more affordable and feasible for you to pay back. Lenders can look at your finances and other debts and renegotiate your monthly payment. The principal will remain the same, but the lender may help make the payments more affordable. Lenders might even grant you a 30-day deferment on your payment. It's certainly worth asking about. Solution #3 Sell another possession If reworking the loan isn't an option and your lender is still demanding on-time payments, you need to find some way to come up with the money to pay your loan. One option is selling a second vehicle. Ideally, you could generate enough money from the sale to supplement your disposal income. If selling your car is not feasible, see if there is some other valuable possession you could sell. Solution #4 Find a part-time job Late payments, missed payments or simply neglecting the loan altogether will result in accumulated late fees, declining credit scores and potential legal troubles. Don't let the situation escalate to that point. Look for part-time work possibilities to augment your income. Not only could this help you make your monthly payments, but it could help you pay off any other debts you may have. The bottom line: Do all you can to avoid missing payments. If you know you've fallen into financial woes and you simply can't afford to pay back your personal loan, explore these steps to ensure you can continue making your regular payments. Your short- and long-term financial health depends on it. Have another personal loan question? Find answers on our Personal Loans FAQ page.  

If you are considering applying for a personal loan, there are many factors you will want to take into consideration. As is the case with any loan or installment plan, prospective borrowers need to take into account the amount financed, the term and the rates associated with the loan. All loan types and forms of credit are different in average rates and terms. With personal loans, which a borrower may use for practically anything they desire, interest rates and APR are higher than you'll find with mortgage loans or auto loans, but sill lower than credit card interest rates and APR. So what can you expect the APR to be on a typical personal loan? First, let's define APR and explore briefly how it is similar and different from the interest rate. APR, or annual percentage rate, is the interest rate (the amount a lender charges in addition to the principal that the borrower pays with the loan) plus additional fees and costs the lender charges for the loan. APR is a rate the lender charges on a loan (in percentage form) for the cost of funds over the course of a year. Because the APR is largely dependent on the interest rate, it's difficult to say what it will be for your personal loans. Rates are assigned based on market conditions and on a person's credit. A low credit score will cause the rate to rise, whereas a good credit score will lower the rate in your favor. Lenders will always charge extra fees and costs on personal loans, which, as explained will make the APR higher than the interest rate. Again, while acknowledging the variations, an average APR with personal loans is around 12.000 percent. If you have good or excellent credit, your APR might dip below 10 percent; however, if your credit is in the low 600s or below, the APR could rise in the credit card-like 20 percent range. Different financial institutions have different APRs, so it's important to shop around for the lender and personal loan that is right for you and your personal situation. One bit of good news is that the APR on your personal loan will almost certainly be fixed, so you won't have to worry about the APR unexpectedly rising. Have a personal loan question? Find answers on our Personal Loans FAQ page. 

Let's say you've been approved for a personal loan through a local lender of your choice. You agreed with the terms, rate and loan amount, and you're thrilled to have some available funds to finance whatever it is you need or want. You take care of those pesky medical bills, you consolidate your debt, or maybe you even head off for an exotic trip. Now it's time to start paying back the loan. You knew this would be the case; you knew you were responsible for complying with the terms. The only problem is life has thrown a curve ball, and you're finding it more difficult than you thought it would be to make on-time payments. This is hardly an uncommon scenario. Financial advisers and experts caution prospective borrowers to ensure they will be able and willing to make monthly loan payments by the due dates. Of course, qualifying for the personal loan and determining that you can indeed make the payments on time doesn't guarantee that this will actually happen.  So... 1. What If You Miss a Personal Loan Payment?  Consequences for missing a monthly payment for a personal loan may include... A short grace period to promptly pay the late payment A small personal loan late fee, $10-$100 Damaged credit score — if over 30 days late Collection agencies involvement — for multiple missed payments Potential lawsuit to reclaim the borrowed money Loan default — severe credit score & report damage - You Will Likely Get Charged a Late Fee If you fail to make your payment by the due date, the financial institution will tack on a late fee to the outstanding amount. The late fee penalty will vary based on the lender, but it can be anywhere from $10 to $100, depending if the lender has a flat rate charge or a late penalty equal to a certain percentage of your borrowed amount. Each missed payment will incur a late fee, so it's easy to see how the costs could add up quickly. Some lenders will allow for a few days' grace period; however, it's prudent to not get behind. If you pay your payment in full within 30 days, your credit will likely not be affected, but if you go past the 30 days, there's no guarantee your account won't be sent to collections and be marked as a delinquency on your credit report.  - Your Credit Score Might Be Impacted Missing one payment won't destroy your credit and make it impossible to finance anything in the future, but a missed payment will likely knock your score down if more than 30 days late. And, if you miss multiple payments, the consequences will be even more dire and your credit score could plummet. Each loan payment is marked on your credit report, so if you have multiple missed payments, future lenders may not want to work with you and your score will likely severely suffer.  - Collection Agencies May Get Involved A single missed payment typically won't result in relentless calls from bill collectors or an official collection case. Instead, you'll get a few friendly reminders from the lender that your payment due date came and went. But once you've missed two or more payments, your account will be sent to collections and the agencies will begin hounding you for the money you owe. This action further damages credit and is more difficult to rectify.  - The Lender Could File a Lawsuit If you ignore phone calls or emails from the lender and fail to respond to collection agencies, your lender could take legal action. In some cases, missed payments could lead to lawsuits that will demand wage garnishment until your past-due amount is paid in full. You can avoid this by communicating with your lenders and creating a payback plan with them immediately.  - You Could Lose Your Collateral Ordinarily, personal loans are unsecured, which means you aren't required to put up collateral against the loan. Sometimes, though, lenders will approve secured personal loans where the borrower will back the loan with an automobile, property title, or another asset. In these cases, missed payments could lead to repossession or foreclosure. - Your Loan May Default Eventually, missed payments will result in loan default. When this happens, your credit score will suffer tremendously, and you almost certainly will have no chance of securing a personal loan (or any type of loan) for at least a few years. Late payments stay on your credit report for up to seven years.    2. What Should You Do If You Miss a Personal Loan Payment? Finances are difficult, and it's not uncommon to miss a personal loan payment every now and again. Whether you had a difficult financial month or a personal emergency came up unexpectedly, you can't always account for what life is going to throw at you. But don't worry; there are things you can do immediately to rectify a missed payment and to ensure you can get your finances and loan payments back on track.  - Contact Your Lender Immediately The first thing you want to do is contact your lender immediately. Ideally, it would be best to let your lender know about the upcoming late payment before the actual due date. That way, there won't be any surprises when your due date rolls around and no payment has been made. Communicating with your lender will show responsibility and concern so it won't seem as if you're neglecting your loan completely.  Depending on the lender, there may be a grace period of a few days that will allow you to turn in your payment a few days late without incurring a late payment penalty.  If you communicate with your lender and make sure to pay your payment in full before 30 days, you likely will not suffer a ding on your credit nor will you have to deal with your loan being sent to collections. However, if your payment is later than a month and you are going to miss multiple loan payments, the consequences could be disastrous. Contact your lender and explain your situation as well as create a financial plan to pay back your late loan payment(s) as soon as possible. Lenders are willing to work with you and develop plans for repayments if you'll simply communicate with them. But ignoring your loan and trying to hide from it will only bring distress and financial chaos. - Request a Free Credit Report You might want to check your credit report to double check your late payment hasn't affected your credit immensely. Your late payment may have been paid back within a few days or a couple weeks, but that doesn't guarantee your credit wasn't affected. Check your credit report to be sure. You can receive three free credit checks a year through AnnualCreditReport.com. - Prioritize and Create a Payback Plan Especially if your personal loan is a secured loan, you want to pay the payments in full as soon as possible. You don't want to risk the possessions you offered up as collateral being seized from your creditors. Talk with your lender about possible payback options and prioritize your payments immediately. This may mean having to choose between paying your loan payment or paying other current bills. Consider which bills have higher interest rates, higher risks (such as collateral on the line), etc. and determine which bill should be your highest priority.  - Cut Back on Expenses If you can't afford to pay your personal loan payments on time, you likely need to find room in your budget to cut back on expenses and increase your monthly income. There are a variety of simple ways you can save money without having to drastically change your finances. Here are a few money-saving ideas you can begin doing immediately that will allow you to pay back your late payment(s) more easily: Cut back on unnecessary spending. For example, stop purchasing that daily coffee and opt for making your own coffee at home. Minimize your monthly bills. For example, cancel your cable subscription or other unnecessary services you can do without.  Carpool when possible to save money on gas.  Avoid going out to eat and make your own food at home instead. Install an app on your phone to track your spending and stay up-to-date on your finances. Sell unwanted or unneeded items around the house. Search for coupons to save money when shopping. Make a shopping list to avoid excess spending. Make your own entertainment instead of paying for activities. For example, instead of going out to an expensive dinner and paying to see a movie, make your own dinner at home or pack a picnic and go on a hike or to a park instead.  Shop at stores that price match to ensure you're getting the best deal possible. Start a side hustle if you have the time.    These are just a few ideas out of countless options you could do now to start saving money and cutting back on your expenses. You may have to sacrifice certain purchases, but your financial obligations are likely your main priority.  - Seek Credit Counseling You may feel overwhelmed with your current financial situation and like you can't handle it on your own. The good news is you don't have to do it alone, and there are people who specialize in finances that can give you the assistance you need. It's important to note that credit counseling will likely cost you, so if you only missed a single loan payment and you're on track to be financially caught up within a short amount of time, you most likely don't need to seek out credit counseling. However, if your late payments and other financial obligations are piling up and you're not sure how to move forward, credit counseling may be worth it.  - Contact a Trustworthy Lender If you're looking to take out a personal loan from a trusted lender, check out our top-ranked personal loan companies. We give a break down of each lender's consumer star rating, APR, maximum and minimum loan amount, credit score requirement, late payment and other possible fees, etc.  Here are our top five ranked lenders in the personal loan industry: See a full list of alternative lending options on our Personal Loan Lending Page.             *Josh McFadden also contributed to this article. 

When using your credit card doesn't make sense or isn't feasible, a personal loan could be the boost you need. Life can throw curve balls at any of us. Medical bills can come unexpectedly, your home may need renovations, or you may just need a little extra cash to fund current expenses. You don't need to pull out the plastic and incur the high-interest rates of your credit card. Lenders everywhere offer personal loans, which you can use for any of the above-referenced needs. In fact, you can use a personal loan for just about anything you'd like. Depending on your credit score and other factors, you can secure a personal loan at a rate much lower than a credit card rate. You can also pay off the loan in three to five years. The application and approval process is almost always incredibly smooth and hassle-free. While applying for a mortgage loan can often entail mountains of paperwork and going back and forth between parties in a seemingly never-ending process, getting approved for a personal loan can often take a couple of business days or less. Most personal loan applications can be completed online by furnishing basic personal information. Once the required information is received, the lender will pull your credit score and make a determination of whether you may qualify, and if you do qualify, how much you can receive, what your interest rate will be and how long the term is. Assuming our credit score falls within the lender's parameters, you can receive an almost immediate approval response from the lender. How Long Does it Take to Get a Personal Loan? Whether your personal loan is for $1,000 or $100,000, you can receive your personal loan funds in as little as the next business day. Of course, this time frame varies depending on the lender, but most personal loans are available in your account within one week at the most, but typically much sooner. Here is a list of the three top-rated personal loan companies and their fund transfer time frame.  #1 Rated - Best Egg: Instant decision process with fund transfer within one business day. #2 Rated - FreedomPlus: Same-day approval with fund transfer within two business days.  #3 Rated - SoFi: No same-day approval with fund transfer within one week.  Certainly, this is one of the appeals of a personal loan, especially if there's an ongoing or upcoming emergency or event that demands your financial attention. So, if you qualify for a personal loan, take comfort to know that those much-needed or much-desired funds are right around the corner. Have more personal loan questions? Find answers to your questions on our personal loans home page.  Josh McFadden also contributed to this piece.

The need to borrow money might start in childhood or adolescence when you ask your parents or friend to spot you a couple of bucks to see a movie or to buy a toy or popular game. As an adult, borrowing money is required for larger, more significant purchases such as a home, an automobile or recreational vehicle. For many purchases, credit cards or installment payments, the typical method is through secured loans, or those with which the person receiving the loan supplies some sort of collateral. There is another form of a loan, however, where the person desiring the loan can be approved without pledging an asset to back the granted funds. These loans are known as unsecured loans. In an unsecured loan, the borrower does not put up collateral against what is lent. Qualifying for an unsecured loan and the degree to which a person is approved is dependent on their credit score, credit history, income and employment status. Unsecured loans can be attractive for the very reason that collateral is not a factor. Your property is not at risk, meaning if you default on an unsecured loan the creditor cannot step in and take your home away from you, as would be the case when defaulted on a mortgage (which is a secured loan). Unsecured loans usually involve a much simpler application process. Because such a loan is largely based on credit score, the lender only has to determine the score and can make an approval decision within one business day. A downside of obtaining an unsecured loan is that you will pay a higher interest rate. Rates will vary depending on the lender, but be prepared to pay additional percentage points. In addition, unsecured loans have strict limits on how much money can be borrowed. With a secured mortgage loan, your approval amount can essentially be whatever you qualify for, whether it be $100,000 or over $1 million. Unsecured loans, however, will be much lower. You will also have less time to pay back your unsecured loan than with a secured loan. A secured loan often must be repaid within three or four years, as opposed to the 10, 15, 20 or 30 years you'll find with a secured loan. One reason for this shorter repayment period is because since the loan amount is smaller, there is no prudent reason to spread the payment out across several years. Another potential pitfall with unsecured loans is that the debt incurred in obtaining such a loan only leads to more debt piling up. People often use unsecured loans to finance other purchases that are in turn financed or paid for through installments. Unsecured loans are often granted in the form of personal loans. A popular loan, personal loans can be used for essentially anything-home improvements and renovations, medical costs, weddings, vacations, and even for purchasing jewelry or expensive electronics. Another common unsecured loan is a student loan, either for undergraduate or graduate studies. In these examples, the student puts up no collateral and instead promises to pay back money loaned for tuition, books, and other educational expenses. Student loans do not need to be repaid until the student has completed his or her studies. If the person fails to pay back the loan, the financial institution can garnish wages or tax refunds to pay on the outstanding balance. Credit cards are also a form of unsecured debt. They, too, carry high-interest rates and can apply steep penalties for late payments or by exceeding credit limits. Educational loans can often be unavoidable for the student seeking to complete a degree. However, most financial experts caution people when considering personal loans and in applying for credit cards. In any case, diligence, discipline, and prudence should be exercised when assuming unsecured debt. People who can make a plan to be dedicated to repaying the loans can avoid the dangers and pitfalls that so often ensnare those who become entangled in excess unsecured debt.   Need help with another personal loan question? Find the answer on our Personal Loans FAQ page.