What are Personal Loans used for?
Personal loans are more common than you may think and they can be used for many things. That includes debt consolidation, emergency expenses, home renovations, medical costs, schooling, large ticket purchases, or even a once-in-a-lifetime vacation. When you apply for a personal loan, you may be asked to specify the purpose of that loan to make sure that it conforms to the lender’s requirements. As mentioned earlier, you also don’t need to put anything up as collateral like you do when you buy a home. Other loans like a car loan or mortgage are for specific purposes. You must abide by the terms of those loans. With a personal loan, you have more freedom to use the loan for a variety of purposes.
Here are the top reasons people apply for Personal Loans:
1 | Debt Consolidation
Many households have multiple forms of debt (credit card, auto loan, student loan, etc.). Instead of making monthly payments for each form of debt, they take out a personal loan to pay off all of their existing debt so they only have to make one payment. This works best when the personal loan has a low interest rate.
2 | Dream Vacations
Dream vacations can cost a lot and if you put that cost on your credit card, it could drown you in debt. Unless you pay off the entire balance of your credit card monthly, many rewards cards aren’t worth the debt and you end up paying for the perks through the interest you pay. Instead, you can take out a personal loan, see the world, and then make affordable monthly payments at a lower rate.
3 | Medical Expenses
Ongoing or unexpected medical bills are typically expensive. If you can’t afford it or pay for it immediately, a personal loan may be one of your best options. Paying off your bills at a low rate could help you save money in the long run.
4 | An Emergency
Life’s hiccups when you least expect it. Ideally, you would pay for sudden expenses with savings or an emergency fund. Unfortunately, most people don’t have more than $1,000 in a savings account. So, when something unexpected happens, such as a repair on your home or you need a new transmission for your car, a personal loan could help. Many lenders will give you a decision on your loan and deposit the money into your account quickly. A personal loan is great when you need cash fast.
5 | Home Remodeling
Whether you want to paint your house, put on a new roof, remodel your kitchen, add a hot tub or sauna, or do some landscaping, a personal loan can be a big help when it comes to home improvements. A personal loan is a good fit for people who don’t have equity in their home or don’t want to get a home equity line of credit (HELOC).
While those are the top five reasons, personal loans are also popular for moving expenses, weddings, large purchases, and more. Get started…
Should I just use a Credit Card?
The most common alternative to a personal loan is a credit card. They’re quite different than a personal loan, but they’re often compared against each other.
Credit cards are great for small purchases and rewards points, but they have to be used wisely. If you can’t pay off your balance right away, it’s risky. Why? Because the average credit card rate is extremely high. When you get buried in that kind of debt, it’s hard to get out. If you have a large purchase coming soon or debt that can be consolidated, a personal loan is a better option than a credit card.
How do I get Approved for a Loan?
There are certain requirements and standards you must meet to be approved for a loan. Here’s what you need to know:
Consider Improving Your Credit Score
Learn how to improve your credit score and get your report at Credit FAQ. You can get a free credit report yearly from the Annual Credit Report website at http://www.annualcreditreport.com/ or by calling 1-877-322-8228 where you will go through a simple verification process over the phone.
Have a Manageable Level of Debt
If your amount of revolving and unsecured debt (credit cards, student loans, etc.) is more than 45% of your annual income, you may present too high of a risk. For example, if you make $40,000/year, you should have less than $18,000 of revolving and unsecured debt.
Request a Reasonable Amount
You have to make sure your monthly loan payments would fit within your budget.
If you do those three things, you’ll be in great shape to borrow money.
Overall, Should I get a Personal Loan?
No two people are in the same financial situation. What works for one person, may not work for you. It’s important to research your options. Opening a personal loan is a commitment. We’ll help you find out if it’s the right product for you. Personal loans are great for their simplicity and flexibility. It’s a specific amount of money, for a set term, at a fixed rate. You know your payment amount, how many payments need to be made, and you can use it for nearly anything. One of the best things about Pearl Hawaii’s personal loans is our low rates. The average personal loan rate in the U.S. is more than 9.00% APR* (check out our rates).
Is a Pearl Hawaii Federal Credit Union Personal Loan right for you?
If you need to borrow money, a personal loan could likely help you. It can be used for nearly anything, it has a low rate, and it’s a more affordable alternative to a credit card. If you’re still not sure whether a loan is the right option for you, call us at 808.73.PHFCU (737.4328) or visit one of our locations on Oahu (Waipio, Waianae, Ewa Beach, Honolulu, Airport, and Pearl Harbor). Our team is ready to look at your financial situation and recommend the best option for you.
If you are ready, let’s get started: Apply