Today on the Rules of Thumb blog from MoneyThumb we are going to help you figure out the best online lender for your personal loan needs. In the age of the internet, it has become easier than ever to obtain a personal loan. Reasons for obtaining a personal loan vary from one individual to another. Below we have listed five scenarios in which a personal loan might be a good idea.
1. Consolidate Credit Cards
If you have one or more credit cards that are charged to the max, you could get a personal loan to consolidate all the charges into one monthly payment. What makes this scenario even more appealing: The interest rate on the loan could be considerably lower than the annual percentage rates (APRs) on your credit cards.
2. Refinance Student Loans
Refinancing student loans can provide some financial relief. Your student loan interest rate maybe 6.8% or higher, depending on the type of loan you have. But you might be able to get a personal loan with a lower interest rate that allows you to pay off your loan(s) faster. If you use a personal loan to pay off all or a portion of a student loan, you will lose the ability to deduct your interest payments (when you file your income taxes) along with the benefits that come with some loans, such as forbearance and deferment. And if your balance is sizable, a personal loan probably won’t cover it anyway. Think through all the issues very carefully before choosing to refinance your student loans.
3. Finance a Purchase
Financing a purchase depends on whether it is a want or a need. If you’re going to take out a loan anyway, getting a personal loan and paying the seller in cash might be a better deal than financing through the seller. Don’t ever make a decision about financing on the spot, though. Ask the seller for an offer and compare it to what you could get through a personal loan. Then you can decide which is the right choice.
4. Pay for a Wedding
Any large event—such as a wedding—qualifies, if you would end up putting all associated charges on your credit card without being able to pay them off within a month. A personal loan for a large expense like this might save you a considerable amount of interest charges, provided it has a lower rate than your credit card.
5. Improve Your Credit
A personal loan might help your credit score in three ways. First, if your credit report shows mostly credit card debt, a personal loan might help your “account mix.” Having different types of loans is often favorable to your score. Second, it may lower your credit utilization ratio—the amount of total credit you’re using compared to your credit limit. The lower the amount of your total credit you use, the better your score. Having a personal loan increases the total amount you have available to use. And paying back the loan on time is, of course, always good for your credit score.
If you find yourself needing a personal loan for any of the above reasons, or maybe you have a reason not listed in this blog post, there are several things you should take into consideration before deciding on the best online lender for your particular personal loan needs.
To assist us in this task, we would like to share what we feel is the best article covering how to find the perfect online lender for your personal loan. This article is from Credible. That article goes into great detail in helping you choose the best online lender for a personal loan. They even break down each lender with their qualifications and interest rates.
Here is the beginning of the article for your reading convenience:
“The best personal loans can help you consolidate credit card debt, pay for home improvement projects, and much more. There are many lenders that offer personal loans, each with different features so it pays to compare rates, fees, loan terms, how to qualify and how long it takes to get funded.
We’ve broken down our picks into four categories:
- Best for good credit: BestEgg, LendingClub, LightStream, Marcus, Prosper
- Best for debt consolidation: FreedomPlus, Payoff, Upgrade
- Best for home improvement: LendingClub, LightStream, Marcus
- Best for bad credit: Avant, LendingPoint, Upstart“
The team at MoneyThumb hopes you will read the full article from Credible before choosing your online lender. We would like you to also know that we have a version of our PDF financial file converters specifically designed for personal use. By taking advantage of our tools, you can quickly and easily convert your financial statements to show your chosen lender, which will be of great help in qualifying for a personal loan.