Whether you’re sitting on an unexpected bill or you want to fund a quick weekend getaway, a personal loan can help you reach your goals. Personal loans offer some unique features compared to a lot of other loan types.
We’ll cover what a personal loan is, what you should look for in a personal loan and show you how a $500 personal loan with a one-year term from MoneyLion might be right for you.
What are Personal Loans?
A personal loan is money that you borrow from a bank, credit union or online lender that you pay back in installments over time. Unlike other certain types of loans (such as student loans or auto loans), you can use a personal loan for almost anything you want.
Similar to most loans, you pay interest on a personal loan, which compensates the lender for its services. Most loans have annual interest rates between 6% and 36% per year if you have good credit, which is a bit higher than most long-term mortgage loans and might be lower than your credit card’s interest rate.
Your bank will usually list your interest rate as an annual percentage rate, or APR, which is the amount of interest that your loan accrues per year. Personal loans are usually paid back over the course of two to five years.
Personal loans are unsecured. This means that they aren’t backed by collateral. Unlike a home or car loan, your lender can’t repossess your property if you don’t pay back your personal loan.
This means that your credit score plays a big factor in determining how much you can get for a personal loan. (Just for reference, your credit score is a three-digit number that ranges from 300 to 850 and references how likely you are to repay debt.)
What are Personal Loans Used for?
You have a lot of freedom in how you choose to use your personal loan. Here are some reasons you may decide to take out a personal loan:
Pay off medical bills
Even with health insurance, medical care can be expensive. If you’re stuck with a massive bill after an unexpected procedure, a personal loan can help you pay it off with a lower rate than most credit cards.
Fund vehicle repairs
Many drivers are unpleasantly surprised to learn that if they only have state-minimum liability car insurance, they won’t get any money to cover repairs to their own vehicle after an accident or vandalism. You can use a personal loan to get your car back on the road if your insurance or the other driver’s insurance doesn’t cover the costs of repair.
Do you have multiple debt accounts open, each with a different lender and a different payment due date? Keeping track of multiple debts can be tough, so you might want to use a personal loan to pay off your individual debts and move them into one loan.
Pay off credit cards
The average interest rate on a personal loan is 10.88%, while the average interest rate on a credit card is about 15.32%. If you’re deep in credit card debt, you can save money in interest by paying off your debt with a personal loan.
Pay for a wedding
Did you know that the average wedding costs about $44,000? That’s a pretty big chunk of change. A personal loan can allow you to say “I do” without saving a year’s worth of your salary first.
Finance a home remodeling project
Dreaming about marble kitchen countertops? A personal loan can fund your home improvement project, helping you increase the value of your home over time and add a personal touch to your home or property.
Finance a funeral
The average funeral costs between $7,000 and $9,000. If the deceased’s estate can’t cover the funeral costs, a friend or family member may take out a personal loan to fund the full cost.
Adopt a child
From paperwork to fees to travel, adopting a child is more expensive than many new parents think. You can use a personal loan to cover expenses related to adopting, including out-of-state travel to pick up your new addition.
Almost any other major purchase
Want to take a dream vacation to Bali? Need a new gaming computer to stream on your online channel? There are almost no limits to what you can do with a personal loan.
What to Look for in a Personal Loan
Unfortunately, not all banks offer great personal loans. Save yourself time by looking for these key characteristics when you consult with banks and credit unions.
APR is a major factor when it comes to choosing a personal loan. Some banks charge you up to 36% interest a year, which means that you’ll pay significantly more at the end of your loan than you originally borrowed.
And if you don’t have good credit, your interest rate will be higher. MoneyLion offers up to $500 at 5.99% APR — a super-low interest rate in comparison to most banks or credit unions.
To show you just how important a low APR is, let’s look at an example. Let’s say you need to borrow $2,000 and you have two APR options: One at 10% APR and one at 15% APR, both over a two-year period. If you choose the first and pay back your loan in installments, you’ll pay $92.29 each month for a grand total of $2,214.96. However, if you choose the second lender, you’ll end up paying $2,327.28 — over $100 more for the same loan.
Personal loan limits
Personal loan providers usually have pretty strict limits on how much you can get in a loan. That’s because personal loans don’t require collateral.
Know how much money you need before you start searching for the right personal loan and make sure that your bank offers personal loans up to the amount that you need.
When it comes to getting a personal loan, convenience is key. Look for a bank or credit union that services its loans online. This allows you to get your money faster.
No origination or repayment fees
Some banks lure you in with a low APR but also charge you for additional required services that they provide. Some common service charges you might see include origination fees, underwriting fees, credit check fees and repayment fees. Look for lenders who offer low or no fees and limited charges to save more money.
How to Get a Personal Loan with MoneyLion
With a MoneyLion Credit Builder Plus membership, you can get a low-interest personal loan in seconds. Use these quick, easy steps to get started with MoneyLion — and get the personal loan you need.
1. Download the app
Go to Google Play or the Apple App store and search for the MoneyLion app. Enter your phone number, input the verification code you receive and follow the in-app steps to open a free account with MoneyLion.
2. Become a MoneyLion member
To get a personal loan from MoneyLion, you’ll need to be a member of Credit Builder Plus. Applying is quick and easy to do through your app.
3. Get approved for your personal loan
Once you’ve joined MoneyLion’s Credit Builder Plus, you can get up to a $500 loan at 5.99% APR instantly. Just submit a request for a loan through the app and see the money deposited in your account in seconds.
Can You Get Personal Loans with Bad Credit?
It is possible to get a personal loan with bad credit. When you get a loan with MoneyLion, you don’t need to get a credit check before you get a loan. If you have bad credit or no credit, opening a MoneyLion Credit Builder Plus account is a great way to get a low APR loan fast.
You can take steps to improve your credit score over time. Here are some steps you can take to increase your credit score:
- Pay all of your bills on time each month.
- Make more than the minimum required payment on your accounts.
- Avoid opening new lines of credit.
- Avoid closing current lines of credit.
- Pay down your debt.
- Remove errors from your credit report.
Taking a loan from MoneyLion can also help improve your credit score. MoneyLion reports to each of the major credit reporting bureaus and offers free credit monitoring services.
In fact, 70% of MoneyLion users see their scores increase. If you need a proven way to start building credit, open a MoneyLion membership.
Getting the Right Personal Loan for You
No matter what your money goals are, the right personal loan can help you achieve them. But being a smart consumer means finding the right personal loan for you — and MoneyLion can help you get there.
MoneyLion Credit Builder Plus membership will give you access to low APR personal loans and other great features like free credit monitoring and exclusive cash rewards. Open an account with MoneyLion today and quickly get the money you need.