Making Personal Loans Work for You
Personal loans help people with various needs, like paying off debt, improving their homes, or dealing with unexpected costs. They provide solutions that are perfect for a variety of personal situations. In this blog post, we will talk about personal loans, credit, applying for a loan, and other related topics.
What are Personal Loans?
Personal loans, also known as signature loans, are unsecured loans that allow individuals to borrow money for different reasons. Personal loans don't need collateral, unlike secured loans like mortgages or auto loans. They are flexible for financial needs. These loans provide members with the cash they need to achieve their goals or aid in emergency situations.
Top 5 Reasons People Take a Personal Loan
- Consolidating Debt — consolidating high interest debt or multiple credit cards
- Home Renovations — smaller projects like new flooring, hot water heater, furniture
- Professional Development — get a certification, take a course
- Emergency — unexpected home repairs, auto damage
- Wedding Expenses — individual vendors, attire, jewelry
Because personal loans are unsecured, a lender needs to protect themselves through interest rates. It is important to shop around and consider your options when looking at personal loans.
One of the main criteria to consider when taking a loan is the total amount you will pay in interest over the life of the loan. It's a good idea to use a low Annual Percentage Rate (APR) loan for big expenses.
For purchases such as a car or a large home renovation project, auto loans and HELOCs may be a better choice than a personal loan. These specialized loans usually have lower interest rates, because the collateral—the vehicle or home—protects the financial institution. This makes them a better choice for certain purchases or projects.
Credit Considerations
Whether you're applying for a personal loan or a line of credit, it's crucial to understand your loan amount or credit limit. Your credit limit is the most you can borrow. Going over it can lead to extra charges and penalties. Be sure to borrow responsibly and only what you can afford to repay the loan comfortably.
While a good credit score can improve your chances of approval, lenders consider other factors. Income, employment history, and debt-to-income ratio all play a part in your credit score. Members with a strong credit profile may qualify for more favorable terms, including lower interest rates. Obtaining a small personal loan may also be a good option for you to increase your credit score.
We suggest checking your credit score and report every month to avoid errors that could affect your credit score. You can check your credit score and receive a free copy of your credit report by visiting AnnualCreditReport.com.
Loan Amounts and Terms
Credit unions often offer competitive rates on personal loans compared to traditional banks. Exploring credit union loan options can potentially result in lower interest rates and more favorable terms. Additionally, credit unions may offer personalized guidance and support throughout the loan application process.
The loan amount you qualify for will depend on your credit score, income, and other factors such as the overall purpose of the loan. The credit union provides clear information about the terms of interest rates and informs members about the costs of their loans.
Utilizing a Credit Union Personal Loan Calculator
Before getting a personal loan, use a credit union loan calculator to estimate monthly payments and total interest costs. These tools can assist you in understanding how borrowing money will impact your finances. They can also help you in creating a plan to repay the borrowed amount.
Visit our free loan calculator on our website.
How to Apply for a Personal Loan
American Heritage Credit Union offers low interest personal loans. Members can start by visiting our website or visiting their local branch. The online application process is user-friendly, guiding applicants through the necessary steps. Required documentation typically includes proof of income, employment information, and details about the purpose of the loan.
Apply for a loan online at any time by logging into Online Teller or clicking here.
Looking for another way to borrow? Consider applying for a credit card.
Conclusion
Personal loans provide a pathway to achieving financial goals without the need for collateral. By learning about credit, loans, and applying for them, people can make smart choices about their money. American Heritage Credit Union is here to help members with personal loans for dream vacations, debt consolidation, or unexpected expenses.
