Personal loans are among the most common financing options for borrowers. They are highly flexible, relatively easy to obtain, and the interest rates are often lower than other borrowing options, such as credit cards.
If you are considering one of these loans, the following are some personal loan FAQs to help you make an informed borrowing decision.
How Does a Personal Loan Work?
Personal loans are sometimes referred to as signature or unsecured loans because they can be obtained without any collateral. Your promise to repay is usually all that’s required. These loans are easy to apply for, and there are usually few or no restrictions on what you can do with the money.
Personal loans have fixed interest rates. The rate will be locked in when the loan is created, and you will repay it over time with fixed monthly payments. The payback period may be anywhere from one to 10 years, depending on how much you borrow.
Similar to other loans, your lender will assess your financial situation to make sure you can repay the money you borrow. Your credit score will be checked, your income will be verified, and your lender will also check to make sure you currently don’t have too much debt.
How Long Does It Take to Get a Personal Loan?
The approval process for personal loans is usually very short. After applying, you will receive the funds within one to five business days depending on your lender and their approval requirements.
Before you apply, be sure that all of the information in your application is correct. Errors or omissions could result in delays.
Do You Need Collateral for a Personal Loan?
Personal loans are unsecured loans, which means that collateral is not required.
What’s a Good APR on a Personal Loan?
Interest is the money you pay your lender for the money you borrow, but the interest rate doesn’t give you a complete picture of how much your loan will cost. The annual percentage rate (APR) is a better indicator of the total cost of borrowing. The APR includes the interest rate as well as any additional fees that your lender may charge.
The APR for a personal loan will vary considerably depending on the current interest rate and your lender. Your credit score is also an important factor in the interest you will pay. As a general rule of thumb, a good APR for a personal loan should not exceed the interest rate you are paying on your credit cards.
Are Personal Loans Installment or Revolving?
Personal loans are installment loans. This means you will repay the money you borrow over time with equal monthly installments or payments.
A revolving loan is when you are given a line of credit that you can draw from as needed. If you are working on a home improvement project, for example, you might draw some money to pay for new flooring. Later, you might draw some more to pay for new kitchen cabinets.
A personal line of credit is a type of revolving loan. Although it sounds similar to a personal loan, the two loans are very different in how they operate.
Does a Personal Loan Hurt Your Credit?
When you apply for a personal loan, a hard credit check will be done. Although hard credit checks may result in a slight decrease in your credit score, it is only temporary. These checks only impact your credit score for up to a year.
The important thing to keep in mind with credit checks is that you don’t want to have too many hard checks in a short period. You wouldn’t want to apply for a personal loan with multiple lenders, for example, to see which one will approve you the fastest. Hard credit checks will be done with each application, which could result in a significant decrease in your credit score.
How Difficult Is It to Get a Personal Loan?
Personal loans are usually easy to obtain as long as you meet your lender’s requirements. Many lenders also give you the option of applying either in person or online.
Be sure to gather all of your documentation before applying to ensure a smooth process and prevent delays. Although the information you will need will vary depending on the lender, the following is common:
- Proof of income
- Proof of address
- Bank account information
How Much Personal Loan Can I Get?
Personal loans are often for amounts of between $1,000 and $50,000, and sometimes more. The amount you can borrow will vary depending on your lender, your credit score, your income, and other factors.
What If I Have Bad Credit?
Having bad credit doesn’t mean you can’t obtain a personal loan. You may be able to rebuild your credit and start over with a TEG Federal Credit Union Fresh Start Loan.
Fresh Start Loans are sometimes referred to as credit builder loans. As the name implies, they were designed to help you rebuild your credit.
The way these loans work is simple. When you borrow money, you don’t receive the funds right away. Instead, the money is held in a bank account. You then make regular monthly payments on your loan. You can obtain the money after you have completely paid off the loan with interest.
The payments you make on the loan will be reported to the credit reporting bureaus. As long as the payments are on time, they will help to improve your credit score.
Personal Loans With TEG Federal Credit Union
If you are thinking about applying for a personal loan, TEG Federal Credit Union offers personal loans with competitive rates, no fees, and no prepayment penalties. Flexible loan terms of up to 60 months are available.
Applying for a personal loan with TEGFCU is quick and easy. You can apply either online or in person. If you have any questions, one of our representatives is just a phone call away.
Check out the following link to learn more about our personal loans and to see how they can meet your borrowing needs.