How Personal Loans Can Provide Cash Now
Unexpected financial needs can happen to anyone. But not everyone has the cash in the bank to cover a car repair, a trip to the ER or an unplanned move. Thankfully, many banks and lenders offer cash loans now that can fill that financial need and bridge the gap between your current and future funds.
Before applying for a cash loan now, ensure you understand the benefits and pitfalls of taking out a loan, how to apply and when it’s responsible to use one. Personal loans are a great financial tool at your disposal as long as they’re utilized properly and with a solid understanding of how they work.
Applying for a personal loan
Before online banking and lending, applying for a personal loan required a trip to the bank with a mountain of documents. Today, you can apply online in minutes at multiple banks and lenders from your computer, tablet or smartphone. Many online lenders can provide a pre-qualification rate with only a soft credit check, meaning it won’t affect your score. If an online lender doesn’t let you see any rates or terms without a hard credit check, then don’t shop around with them unless it’s your last option.
Once you pick a lender — or a couple — that you feel will best suit your financial needs, you’ll need handy to provide your Social Security number, source of income, employer contact information, banking information and how much you want to borrow for the application. Keep this information on-hand before applying to make the process easier.
If your credit history is not the best or not well-established, you may need a co-applicant willing to sign on the loan. This person, who will also be responsible for the repayment of your loan, will need the same information to prove their creditworthiness.
Once you’ve collected all of your documentation, navigate over to one of the top personal loan lenders on your list and begin filling out your application. Most applications take between 5 and 10 minutes, and in many cases, applicants get an answer in minutes.
Benefits of personal loans
Online lenders offering cash loans now have several advantages to borrowers over brick-and-mortar lending. With online personal lending, you’re able to get funds much faster from online lenders. Some lenders can even approve funds and get them into your bank account in under 24 hours.
Personal loans also typically have lower interest rates than the average credit card. This, of course, depends on the borrower’s credit history, but a personal loan interest rate is usually no lower than 11%, while credit card interest rates are 15% or higher. If you plan to pay off the personal loan on time, or even early, you’ll find better savings on interest than you would with credit cards.
Pitfalls of personal loans
While personal loans can be a great source of fast cash for those in need, the loans do have drawbacks. Interest rates are almost always higher than other loan products. The current industry average APR on a personal loan for a borrower with near-perfect credit (720-850) is around 11.4% while an auto loan for that same borrower is around 3.6%. In other words, the money through a personal loan is significantly more expensive to borrow, especially if you are getting an unsecured personal loan.
Lastly, these loans can carry additional fees and penalties you’ll want to be aware of. Some personal loans carry an origination fee, which is a fee for the processing of the loan. This can range anywhere from 1% to 6% of the loan. Lenders may also charge late payment fees, sometimes with a grace period and sometimes without. This fee can be around $40, but that could make or break a tight budget.
When to use a personal loan
Personal loans should only be used when there’s a need for the money that can’t be met through another viable means. In other words, don’t start taking out personal loans to take vacations, buy a boat or other luxury items you wouldn’t normally buy. While doing so might seem reasonable, it sets you up for the potential of falling into an endless debt spiral of continuous borrowing.
If your financial need is an unavoidable necessity, you’ll want to weigh all of your options before deciding to take out cash loans now. Check the interest rate on your credit cards, home equity loans, 401(k) loans, savings and any other financial instruments at your disposal. Compare rates, terms and eligibility criteria to determine the best option.
If the right choice for your unique situation is a personal loan, make sure to shop the many different options on the market. Look for factors like interest rates, prepayment penalties, origination fees, payment size, repayment terms and more. Once you’ve decided on a lender to use, complete the application process and wait for your approval. Most approvals are instant or at least same-day.
Some of the more popular reasons for taking out a personal loan include debt consolidation, building credit, financing a home remodeling project or for unexpected emergency expenses.
The final word
Getting cash loans now is a viable option for many people looking for a quick infusion of cash. But this option is only fiscally responsible when approached with a full understanding of how personal loans work, the pros and cons of using one and how to shop around for the best rates and options.
Thankfully, most banks and lenders offer some form of secured or unsecured personal loan, which means you’ve got plenty of options to choose from. The better your credit, the more money you’ll be able to borrow and the better interest rate you should get.