If you have unforeseen expenses or are just having a hard month, you may be considering a personal or unsecured loan. Below is a brief explanation of these types of loans and four common scenarios where they come in handy and can make good financial sense.
What Are Personal Loans?
Unlike a mortgage or a car loan, a personal loan is granted based largely on your credit rating and history. If you have good credit, your interest on that loan tends to be lower than if your credit was on the iffy side. Banks, credit unions and other lending outfits want to have a reasonable expectation that they will get their money back. Your loan comes in a lump-sum payment, which is usually paid back on a monthly basis, along with the accrued interest. Most interest rates are fixed, but some flexible interest plans are also offered, depending on the lender and your loan agreement.
Four Reasons to Take Out a Personal Loan
Home Improvement Project
Your home improvement project may be elective, like putting in that bathroom you've always wanted, or one that just "happened," such as repairing the damage from an exploding water heater. Either way, you've decided you don't want an equity home loan, which usually takes longer. You also don't want to touch your savings. Taking your work estimate to a personal loan lender may be the perfect solution.
Consolidating Your Debt
If you've got a lot of bills with different creditors, taking out a personal loan to pay them off might actually save you time and money. You will usually save on interest fees, depending on the types of bills. You'll also only have one creditor payment a month to worry about, rather than a stack of bills to work through.
Paying Off High Interest Credit Cards
Even if you don't have stacks of bills to worry about, one or two credit cards with high interest rates can really stretch your budget. Taking out a personal loan to pay those cards off can save you money, especially if you are in danger of falling behind in your payments. Credit card companies sometimes charge late fees and may also increase your interest rate. Payments on the fixed interest payment loans remain the same for the duration of the loan agreement.
Medical emergencies sometimes happen at the most inopportune financial times. They are stressful enough, even without having to worry about paying medical bills. Personal loans can help you pay for emergency procedures or even help you cover a high deductable on your medical insurance policy. Having the payments stretched out over a period of time is less stressful. The payments can also be worked into the family budget more easily.
For more information, contact Juniata Valley Bank or a similar location.