What is a Personal Loan?
A personal loan is a type of financing provided as a lump sum that is repaid in monthly installments, typically with fixed interest rates and predetermined repayment terms. These loans can range from $600 to as much as $100,000, depending on the lender. Financial experts generally consider personal loans with APRs under 36% to be affordable.
There are two main types of personal loans: secured and unsecured. Most personal loans are unsecured, meaning they don’t require collateral. Instead, lenders evaluate your credit history to determine eligibility and terms.
Personal Loan Interest Rates
Lenders set your interest rate based on factors like your creditworthiness, how you intend to use the loan, and the loan term. To secure the best rates, borrowers typically need a good credit score, a strong record of on-time payments, steady income, and a low debt-to-income ratio.
It's important to note that the lowest rates advertised by lenders are usually reserved for those with excellent credit. If your credit score needs improvement, you may end up paying higher interest over the course of the loan.
Debt Consolidation Loan
Quick look at a debt consolidation loan
Who it's for:
Borrowers with multiple credit cards who can manage their debt and have good credit.
How it works:
Combines your existing debt into one monthly payment, ideally with a lower interest rate.
Risks:
If you don't adjust your spending habits after consolidating, you could end up in more debt. Some lenders also charge origination fees as high as 12%, which is deducted from your loan before you receive the funds.
If you're having difficulty managing your debt, struggling to make consistent on-time payments, or simply want to combine multiple accounts, a debt consolidation loan could be a good solution for you.
Credit Card Refinancing
Quick Look at Credit Card Refinancing
Who it's for:
Individuals with high-interest credit card debt looking for a way to lower their interest rates and simplify payments through a personal loan. This is ideal for those who are committed to paying down debt and improving their financial habits.
How it works:
Credit card refinancing involves taking out a personal loan with a lower interest rate to pay off your existing credit card debt. This allows you to consolidate multiple credit card balances into one monthly payment, often at a lower APR, which can save you money in interest.
Risks:
A longer loan term may lead to paying more interest over time, even with a lower APR. Continuing to use your credit cards after refinancing can result in more debt, turning refinancing into a temporary solution rather than a long-term fix. Without proper budgeting and financial discipline, you risk falling back into a cycle of debt.
Refinancing high-interest credit card debt with a lower-interest personal loan can help you save money, but there are some potential drawbacks to watch out for. A longer loan term may lead to paying more in total interest, even if the APR on the loan is lower than your credit cards. The longer it takes to repay your debt, the more interest can accumulate.
Additionally, if you continue using your credit cards after refinancing, it’s only a temporary fix. To avoid falling back into debt, it's important to also review your budget and spending habits alongside refinancing.
Pros and Cons of Personal Loans
You can save money by comparing lenders to find the one offering the lowest APR available.
Personal loans come with a fixed payment schedule, so borrowers know precisely how long it will take to repay their debt.
Personal loans are usually unsecured, meaning you don't need to provide collateral to secure the loan.
To qualify for lower APRs, you'll need a solid credit profile. However, if your credit score isn't where you'd like it to be, you can work on improving it and reapply for better rates in the future.
Missing a personal loan payment can lead to default, which may negatively impact your credit score and future creditworthiness.
Some lenders may charge an origination fee, which can be as high as 12% of the loan amount.
TAKE A STEP IN THE RIGHT DIRECTION
Explore more
efficient ways to
Payoff Debt
Questions about the process? We're here to help you get started!
Disclaimers:
*Assumes all of your debts are eligible for enrollment, are enrolled in the program, and you successfully complete the program. The majority of clients who successfully complete the program resolve their enrolled debts in 24 - 48 months (average 35 months).
Not a broker or lender: the purpose of Finally Payoff Debt (“the website”) is to connect potential borrowers with lenders and financial service providers. Finally Payoff Debt (“the website” does not provide any offers of credit or solicitation to lend. The website and its operators only provide a service and are not agents, representatives, or brokers of any lender, do not make any credit decisions and do not charge potential borrowers for any loan or product. We are paid by Lenders, Lender Networks and other Advertisers: Finally Payoff Debt (“the website”) offers a free, for-profit, advertiser-supported loan connecting service to consumers. Lenders in our network and other third-party lender networks we use pay us if a lender offers you a loan after reviewing your information through our service. You never have to pay a fee to use our services to connect you to a loan offer. Always review all options available to you and never assume a loan offer you receive is the best loan offer available to you. See our Ad Disclosure for more information.
Personal information and credit implications: Finally Payoff Debt (“the website”) may collect personal information provided by you for the purpose of submitting it to our lending partners. The purpose of this will be to obtain consumer report information from your credit profile in order to do a credit check, to verify your information, review your creditworthiness, prequalify you, and/or determine if you qualify for certain credit terms. You are under no obligation to use this website to apply for credit or initiate contact with any lender. Late payments or nonpayment of loans may result in additional fees or collection activities, or both, as well as negative impacts to your credit score. Each lender has their own terms and conditions, please review their policies for further information.
Availability: Residents of some states in the U.S. may not qualify for a loan as a result of certain lender requirements. Finally Payoff Debt (“the website”) does not guarantee that submitting your information will result in you being offered a loan product by a lender, or you being offered a product with rates or terms as desired. Many factors about you and your loan request information will impact the terms of the loans that may be offered to you. Always review all options available to you and never assume a loan offer you receive is the best loan option available to you.