Small Personal Loans

It seems like everybody finds themselves a little short on cash from time to time. Maybe you’re running low on funds to finish up that home improvement project, or perhaps you’re unable to pay a medical bill or fix a vehicle. If so, a personal loan might be just what you need.

What is a personal loan?

Personal loans are usually small, unsecured cash advances that are used to get you through an unexpected financial tight spot, or to help you consolidate debt. They are designed to be short term in nature, with a typical time frame to repay the money being anywhere from a couple of months up to several years. The interest on these loans is usually fixed, which means your monthly payments won’t fluctuate and will remain consistent throughout the life of the loan.

Are personal loans safe?

The first thing you always want to look for is a reputable lending organization. These might be local banks or credit unions that offer personal loans, or it could be a company you have heard about through advertising or seen on-line. Whatever the source, make sure to investigate any company you plan to do business with.

The vast majority of personal loan companies are legitimate organizations, and are able to offer real assistance for individuals who need temporary financial help. Unfortunately like any other industry, there are several companies these days that may look completely legitimate, yet continue to scam innocent, hard-working Americans on a daily basis. One of the easiest ways to avoid this nightmare is to do your research. You can also always check with organizations like the Better Business Bureau to see if there have been any complaints filed against the company, and if so, how they were handled. Or you can do a simple internet search for reviews of the organization you are considering using.

One important thing to remember is that if things go wrong, you always have someone in your corner. The Consumer Financial Protection Bureau exists to “help ensure consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives.” While we all hope it never comes to the point of needing their help, you can file a complaint if necessary against an organization that you feel has treated you unfairly or in an improper way.

Why would you want a personal loan?

There are many reasons a personal loan might be best for your situation. If you’re short on cash, personal loans are fast. Many places, including most major banks, will tell you within hours if you qualify. They are also fairly easy to access with many lenders offering an on-line application that can be completed in minutes. Additionally, the interest rates are usually fairly reasonable, and unlike credit cards, your monthly payments will be a fixed amount making it easy to budget the repayment amounts.

Personal loans can be used for a variety of things and therefore can come in all shapes in sizes.

It is important to be aware of the different types of loans available so that you can be sure to get the best rates and general terms for your unique situation. It is also important not to confuse a personal loan with a payday loan, which can be a debt trap that should be avoided at all costs.

What to look for in a personal loan?

Of course, securing a loan with a low interest rate is always ideal, but that may not be an option if you have bad credit. It is a good idea to pull a recent copy of your credit score before beginning the process.

By doing this you will have an idea of what kind of shape your credit is currently in, and will know ahead of time what you could potentially be up against. Generally, a credit score of 620 or lower is considered “bad.” But even if your credit score is in the tank, you can usually find a lender willing to loan you money. You’ll just end up paying more for it, usually with higher interest rates and larger monthly payments.

Bbenefits of taking a personal loan

As we just discussed, personal loans can be an ideal choice for your situation even if you have bad credit. But if you’re trying to rebuild your poor credit, the benefits you could receive by taking out a personal loan may be even greater than first expected.

One increasingly popular use for these types of personal loans is to use the money to consolidate and pay off all of your other pre-existing debt. By taking the loan money and paying off all of your other creditors, you not only have made your monthly bill-paying experience a whole lot simpler, but you may very well see a nice increase to your overall credit score.

The key to keeping your score headed in the right direction is to be sure to make all of your loan payments on time. This should be easy to do when you keep in mind the fact that by choosing this approach you are potentially saving a good deal of money that was previously spent on credit card companies and all of their monthly fees and charges.

Okay, so you’ve decided a personal loan is exactly what you need. We’ve compiled our top ten tips to get you from in the hole to having cash in your pocket.

1. Know what you’re starting with:

Your very first step as mentioned before, is to pull your credit report. According to the Federal Trade Commission, you are entitled to a free credit report once every 12 months from each of the three major reporting bureaus.

2. Decide how much you can afford:

Everyone has monthly income and expenses, and it is important to be honest and realistic about how much extra you can fit into your budget to make the monthly payments to pay back the loan. There’s no sense in securing a loan if you can’t make the payments.

3. Calculate your payments:

There are some great free loan calculator tools on-line that will help you calculate what your monthly payments will be based on the information you provide it. Simply input your loan amount, term and interest rate and – viola – your monthly payments will be calculated.

4. Determine if you’ll need someone to co-sign for you:

If your credit is bad or you have no credit history at all, you may need someone to co-sign for the loan with you.

Remember that having a co-signer on your loan requires them to guarantee the loan amount will be repaid, and in the event that you default, they are equally responsible for paying the lender back.

Since that is a huge favor to ask of anybody, you may want to focus on family members or a close friend. Whoever you ask, they will need to be financially trustworthy and you should ensure they understand the risk they’re taking on your behalf. It is definitely worth asking someone when you need the help, especially since having a co-signer can save you big money by lowering your interest rate or giving you other options that would be otherwise unavailable.

5. What documents will you need to gather?

It is almost frightening how easy it is to apply for a personal loan these days. Many lenders have an online form you can fill out which will ask you for some basic information. Most of the time you will also be required to submit proof of employment and a steady source of income. Beyond that, each lender varies with what they will require from you before they will issue you a loan. It may help to have a checklist of items collected for when you are ready to talk to them.

6. Shop for loans:

As we mentioned earlier, the Consumer Financial Protection Bureau can be helpful when shopping for loans by helping you eliminate any bad organizations from your list of potential lenders. You may also choose to utilize the services of a broker. They can listen to your needs and often instantly pinpoint the loan that’s best for you. Or, you can visit on-line sites such as SuperMoney.com where you’ll find a list of lenders and reviews that can help consumers wade through the many choices available.

7. Understand the terms:

What is an annual percentage rate? How much will the loan cost? What will your finance charges be? Exactly how long will you be paying off your loan? The University of California offers a great glossary of loan terminology that you can use if you’re confused about what something means in your loan documents. When it comes to borrowing money, the more you educate yourself, the better.

8. Read the fine print:

Before finalizing your loan by accepting it, be sure you read all your documentation thoroughly. Remember, it might be better to walk away from an offer and think about it for twenty-four hours rather than signing right away simply because you’re desperate. Some creditors can be really sneaky. Don’t let them pull a fast one.

9. Signing on the dotted line:

So you’ve done your research, you’ve read the fine print and you’re ready to take the next step. Great! Just make certain the loan you’re signing for is the one you really want. Check for hidden fees. Find out what will happen if you default. Is that spelled out in the contract? Read, read, and read some more. Ignorance is bliss – but not when it comes to paying back a loan. Best not to sign anything until you’ve read every word on every page.

10. What to do when you get the money:

Don’t spend it on anything other than what it was originally intended for. It’s tempting to go out and buy yourself something nice, especially when you’ve been broke for a while, but stick to your original plan. Whether you’re paying off your credit cards or bills that seem to be piling up, follow through with your original intentions. Your goal should always be to reduce your debt. And remember that if you’re trying to repair your bad credit, making your personal loan payments on time can help you turn that bad credit score into a good one.

Bad credit, no credit, too much credit – if you find yourself in a financial bind, personal loans can help. The key is to take advantage of them for the right reasons. Have a plan, and stick to it. Hopefully, now that you are armed with all this valuable information, your personal loan experience will be an easier and more pleasant one.