Used responsibly, a personal loan can be a vehicle for advancing your education, improving your earning power, even for getting out of debt faster. If you’re considering a personal loan and want to understand if it’s a good option for your situation, here are some common questions that may help determine if it’s the right choice for you.
Can I Use a Personal Loan to Help Eliminate Credit Card Debt?
Yes. According to the Consumer Financial Protection Bureau, some credit cards carry up to a whopping 25 percentage or higher rate. If you’re balancing multiple credit card payments, using a lower-rate personal loan to pay them off may enable you to eliminate that debt more quickly and save countless dollars of high-interest payments to credit card companies.
What About Consolidating Other Debts?
Similar to credit cards, paying off other existing debts or refinancing your student loans with a new loan at a lower rate can be one of the most responsible ways to use a personal loan. Along with potentially saving significant money over the life of the loan, consolidating several debts can also help you streamline and simplify your monthly budget and expenses. If you’ve struggled to organize your finances, switching to just one loan may save you time and reduce the risk of late fees or missed payments that can come with juggling multiple different bills throughout the month.
How Do I Know If I Can Get a Better Rate?
You can compare loans and rates that are available to you by using an online loan comparison tool. The best part? In addition to being quick, easy, and discreet, there’s no impact to your credit score for doing this.
Can I Apply for a Personal Loan for Education Expenses?
Yes. Sometimes financial aid or federal loans don’t cover all of your education expenses, and you’re left looking for ways to cover all of your class and daily expenses, like books, lab fees, housing, and food. A personal loan can help cover those costs.
What About My Credit Score?
Reputable companies will check your credit before assigning interest rates; your current credit score may impact the loans and interest rates available to you. A good way to know where you stand is to do a quick online check. That’ll tell you what’s available now, but what about your credit going forward? “The factor that often has the greatest impact on many credit scores is payment history,” according to Experian, one of the large consumer credit reporting agencies. Once you’ve received your loan, making your payments on time consistently will help maintain and, over time, may increase your overall score.
Everyone’s situation and goals are different. Knowing what options are available can help you make the most informed choices about how to eliminate any past debts and manage your financial future.
Photo Credit: Frankieleon