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5 Questions to Ask Yourself Before Taking Out a Personal Loan
May 23, 2023 by Spectrum Credit Union
Are you feeling overwhelmed by debt, trying to fund a major expense or desperate for a home renovation? With a personal loan, you can consolidate your debt or pay for that big expense, and you might be able to secure an interest rate that’s more
competitive than other financing options like credit cards.
Ready to learn more but need help figuring out where to start? Check your knowledge about personal loans and determine if it’s the right financial fit for you.
1. What are personal loans?
Personal loans are unsecured loans you can use for almost any purpose. Lenders offer different terms that usually range from 12 to 60 months. The loan amounts vary too, depending
on the need, but you can often borrow as much as $25,000. You receive the money as a lump sum and repay a set amount monthly throughout the loan term.
Home improvements, tax bills, medical treatment and debt consolidation are the most common reasons people utilize personal loans. But the loans are unique because you aren’t limited in how you spend the money.
2. Is a personal loan the right option?
Whether a personal loan makes sense for you depends on why you want one. If you plan to use the loan for a big expense, it’s important to ensure you can afford the monthly payments and qualify for a competitive interest rate. If you intend to use
the loan to consolidate debt, it’s wise to compare loan rates to your current rates and see how much you can save.
Credit cards and other loan options like home equity lines of credit (HELOCs) often have variable interest
rates that can fluctuate. As a result, your monthly payment can change too. If you want a fixed interest rate and regular monthly payments, a personal loan might be the best choice for you. You can use a personal loan calculator to help you determine what your monthly loan payment will look like.
3. What are important terms to be familiar with?
As you consider a personal loan, you might encounter the same terms repeatedly. Here are some keywords to understand when researching personal loans.
- Principal: The amount that you originally agreed to pay back. If you take a loan for $10,000, you might pay more than that amount because of the interest accrued, but $10,000 is the principal.
- Interest: The fee you pay to borrow money, usually in the form of a percentage.
- APR: Annual Percentage Rate (APR) is the interest rate you pay over a year.
- Loan term: The length of time you repay a loan is the loan term. Personal loan terms usually range from 12 to 60 months.
- Monthly payment: The amount of money you pay towards your loan each month. When you have a personal loan, this is a fixed amount that does not change.
4. What is a good interest rate?
Interest rates for personal loans vary depending on external factors like the current market and individual factors like your credit score. But for a limited time at Spectrum Credit Union, we are reducing our personal loan rates to as low as 7.60% APR* to help our members take control of their financial future and achieve their goals.
5. How do you apply for a personal loan?
Once you’ve decided on the best option for your needs, most loan applications can be completed online. The application process for a personal loan is straightforward
— gather the necessary personal information and complete the online application. You typically need to provide your social security number, address and employment information, and most lenders require a credit check as well. Once the lender
confirms and approves everything, you will review your loan offer, finalize the application and then you will receive the funds.
With knowledge and guidance along the way, taking out a personal loan doesn’t have to feel overwhelming. With Spectrum Credit Union’s rates currently as low as 7.60% APR*, flexible repayment terms from 12 to 60 months and loan amounts up to $25,000, let us help you meet your financial goals. Ready to learn more about your options for a personal loan? Give us a call at 800-782-8782. We’re happy to help!
*Annual Percentage Rate (APR) shown is valid April 11 through June 10, 2023, and applies to terms of up to 36 months. Member must complete and submit a full loan application. Loans subject to application, credit qualification, and income verification. Minimum gross monthly income of $1,000 required. Loan amounts available between $2,000 and $25,000. Your APR will depend upon your credit history, term, and will be determined when a credit decision is made. Actual rates are disclosed to approved applicants in writing prior to loan consummation. Other restrictions may apply. Loan payment example: $31.17 per month per $1,000 borrowed at 7.60% APR for 36 months. This is a payment example. Your payment may vary. All loans subject to approval.