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3 Signs You're Financially Ready for a Personal Loan

Loans
A personal loan is an unsecured loan that you use in any way you wish. Use a personal loan to pay off medical expenses, finance a move, or to catch up on unexpected bills.

While a personal loan typically doesn't require collateral such as a car or home to financially back the funds you receive, this type of loan should be taken out with precaution. If you get a personal loan and you're unable to pay the loan back on time, you risk your credit and being able to get a personal loan or other type of loan in the future.

Are you financially ready for a personal loan? Use this guide to assist you. Speak to a personal loan representative at your bank, lending institution, or credit union to help you decide if a personal loan is right for you.

1. Your Credit Is Good

The higher your credit rating, the greater chances you have of getting a personal loan with a lower interest rate. While personal loans usually offer much lower interest rates than credit cards — and are therefore a better option when you need to borrow money — a lower credit score may mean paying higher interest rates throughout the term of your loan.

The closer you can get your credit to 850, the greater chances you have of obtaining a lower interest personal loan.

If your credit score is under 580, then your chances of getting approved for a personal loan in any amount are low. You can improve this lower credit score with time by making payments on time to medical institutions and credit cards, limiting use of credit cards to increase your open credit, and paying off smaller debts in full.

Your loan specialist will show you ways you can improve your credit score and become more financially stable so you can achieve a loan in the future.

2. You Have Plans for Your Personal Loan

Getting a personal loan with no set goals for how to use the funds leads to poor spending decisions and can put you in more debt. Write down a concrete plan for how you will utilize your personal loan. For example, you can use a percentage to pay off a vehicle loan while you set aside the remainder for an upcoming dental bill.

In addition to knowing how you plan to spend your personal loan, have a set plan for how you will pay the loan back. Will you eliminate credit card debt with your personal loan, thus freeing funds for paying back your personal loan? You must pay off a personal loan by a certain date and make payments on time every month.

If you don't have the finances available to put towards your personal loan, you need to either eliminate expenses elsewhere in your budget or get a personal loan when you are more financially stable.

3. You Have a Steady Income

You shouldn't use a personal loan to take care of your regular expenses as a replacement for income. If you don't have a steady job, Social Security benefits, or other means of income — child support included — then you risk being unable to pay your loan back in addition to the rest of your monthly expenses.

You can obtain a personal loan with poor to great credit, depending on what institution you use and how much money you need. Speak to many lenders about fixed interest rates, loan payment plans, and other concerns prior to getting a personal loan. Our loan specialists at Service Finance Co. and Employee Finance Co. will help secure a personal loan that meets your financial needs today.

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