A personal loan can be the lifeline you need to pay off high-interest debt or help to make things right at a time when you can least afford for things to go wrong.

What is a personal loan?

There are several types of personal loans: 

• A Personal Loan is a lump sum loan with a fixed rate. Often, these are used to consolidate debt or cover an unexpected expense.
• A Personal Line of Credit provides the money you need – when you need it – up to your available amount.
• One secured by collateral, such as a savings account with a variable rate.
• A Credit Builder Loan allows you to make payments in the amount you choose so credit bureaus can see your positive repayment history.
• An Emergency Loan gives you short-term cash, fast.

Understand the state of your finances

When you apply for a personal loan, a lender may look at your debt-to-income ratio, which tells them if you are in a place to manage another monthly payment and repay debts. Look for yourself: a Loan Payment Calculator helps you determine what your monthly loan payment might be. Then check your budget to make sure you can afford this additional monthly bill. Approvals for personal loans are not only based on your credit score. Some companies consider your capacity to repay the loan, your available capital or how much money you have in reserve, and your character.

Find out the loan terms

While the interest rate is an important part of any loan, you also need to know and understand the terms offered and if you can meet those terms, if another loan type is better for you, or if maybe now is not a good time to take on more debt.