What's a personal loan again?
A Delta Community Personal Loan is an unsecured installment loan you can use pretty much however you want. An unsecured loan is provided by a financial institution based on the borrower's creditworthiness, rather than by the borrower providing an asset of value, known as the collateral, to secure against the value of the loan. An installment loan means that the borrower can pay the loan back in multiple installment payments, instead of paying the entire amount back in a lump sum. The loan is paid back during an exact, limited-time period—the term—of the loan. Having good credit is necessary in order to be accepted for a personal loan, just as it's required to get any other sort of loan or a credit card.
How could a personal loan help me?
One of the benefits of a personal loan is its flexibility; you can use it for almost anything. Everyone can use a bit more money now and then, either for needs or wants. Perhaps you have something that needs to be repaired or the opportunity to buy something special coming up on sale; maybe you have located an extremely scarce, very desirable item that's available for a limited time. There could be a situation where someone needs some extra cash soon, and they will have a bonus or tax refund coming in a few months that will easily pay back a short-term loan. The amount of a personal loan is based on your choice, and a number of financial institutions offer loans that could be as little as under a $1,000 or as large as several thousands of dollars, and it can be used immediately or over time. The loan application process can be simple, efficient, and relatively quick.
What else could you do with a personal loan?
With a personal loan you could:
- Make essential repairs on your home, or improvements that will increase its value.
- Make repairs on your car, or get new tires for it.
- Use it to consolidate and pay off higher-interest loans, which could actually save money.
- Pay off outstanding bills.
- Replace a failing dishwasher, refrigerator or another appliance.
- Create an emergency fund.
- Pay for tuition or tutoring for school, music or sports.
- Pay down medical expenses for prescriptions, visits and procedures.
- Replace a really useful piece of personal technology, such as a computer or a cellphone.
- Help a relative or a friend with their finances.
- Buy an important gift for a special occasion.
- Go on a memorable vacation.
And the benefits of a personal loan vs. a credit card are?
A credit card gives you a line of credit, usually for several thousand dollars. If you already have one, why not use a credit card instead of a loan? That's a valid question, and it's worth digging into how a loan and a credit card operate differently. So, how does a personal loan differ from a credit card? Here are a few key differences:
- A credit card will often have a higher interest rate than a loan, so it can cost you more to use the card's credit.
- The interest rate for a loan is fixed, which means that it stays the same until the loan is paid back, while the interest rate for a credit card is almost always variable; it can go up, especially if you don't pay back the complete amount of your balance—the amount you owe the credit card company—every month.
- A loan is very likely to have more flexible payment options.
While a credit card is a regular, dependable part of your financial toolkit, don't overlook the special advantages that a personal loan offers.
Consider if a personal loan fits your needs
When someone needs access to additional cash, and has a good credit rating, a personal loan could be extremely helpful. Is this type of loan appropriate for everyone? As with many things in life, the answer depends on the specific needs of the person and how they prefer to manage their money. If life circumstances mean that extra money is a necessity now, or soon, then a personal loan might have the financial advantages that accommodate your needs. If you want to think about whether this type of loan is right for you, you can ask yourself a few questions about your current finances, such as:
- Do I need more money now, or can I wait?
- Is my credit score strong? Personal credit scores significantly affect the ability to get a loan. Credit scores can be checked at no cost at www.annualcreditreport.com.
- Would it be difficult to consistently make the loan payments for the term of the loan?
- Do I want to take on debt (or more debt) now?
- Are there other types of funding options to consider instead of a personal loan from a financial institution?
Consider the above questions, and maybe get the perspective of family and friends on applying for a personal loan.
Looking for more information on managing money, debt and credit? We have a few more blog posts for you below.