Personal Loan Explained
A personal loan is a loan you qualify for based on your credit history and income. Personal loans are sometimes called signature loans or unsecured loans because there is typically no collateral required to secure a personal loan.
A personal loan affects your credit score much like any other form of credit. On-time payments will build credit, while late payments can damage your score if they’re reported to the credit bureaus
No Collateral
Defaulting may affect your credit score, but you get to keep your assets.
Quick Approval
You can often apply (or pre-qualify) for a personal loan online and receive an answer the very next day.
Examples of Personal Loans
Debt Consolidation
When you use a personal loan for debt consolidation, you borrow one large sum of money and use it to pay off all your other debts, such as credit cards, student loans, and auto loans.
Unexpected Expenses
The best way to handle major, unplanned expenses, such as hefty medical bills or major car repairs is to have an emergency fund to cover the cost.
Wedding Costs
A personal loan can be a cheaper alternative for financing this big event than credit cards.
Vacation Expenses
Some people even take out personal loans to pay for a dream vacation. If you have a once-in-a-lifetime opportunity and don’t have the cash, a personal loan could be your next-best alternative.