Virtual Branch Online Banking

Click Here to Log In
First Time User? Enroll Now.

Seven Personal Loan FAQs

Seven Personal Loan FAQs

If you’re considering the option of a personal loan to help you face an expense, you’re not alone. Millions of people take advantage of personal loans for certain cash needs. Here are some of the most frequently asked questions about personal loans.

1 How can personal loans be used?

Personal loans can be used for just about any cash need. Examples include large purchases, emergency home repairs or car repairs, major medical expenses, college expenses, weddings, holidays, vacations, pay off credit cards, pay taxes or just about anything.  So, whether you want to furnish your living room, buy that new ATV you’ve been wanting, or you just got hit with a big unexpected medical bill, a personal loan can help.

2 Can a personal loan be used to consolidate debt?

Debt consolidation is a popular use for a personal loan. It’s an effective way to combine multiple types of debt into a single, predictable monthly payment. This can include several types of loan debt, such as student loans, an appliance loan, or even credit card debt. Paying off your credit card balances with a personal loan is a great way to save on interest. Personal loan interest rates are often much lower than credit card interest rates and higher interest loans. Consolidating debt with a personal loan may also help you to pay off your debt in a shorter amount of time.

3 Is it hard to get approved for a personal loan?

Personal loans can be secured or unsecured. A secured personal loan can typically be easier to be approved for, simply because it is secured with collateral. Unsecured personal loans, on the other hand, are actually more popular, because they do not require collateral. Approval for a personal loan typically depends on your credit score, your income, and your debt. On a scale of 300 to 850, a credit score of 700 and above is considered good. Of course, the higher your score, the better the rate you will qualify for. If you have a decent income and good credit score, you shouldn’t have a problem qualifying for a personal loan.

4 What documentation is needed to apply for a personal loan?

Driver’s license or another form of ID, proof of income, such as pay stubs and employment information. Lenders also typically require a listing of assets and debt. Many lenders, such as Choice One Community Credit Union, allow you to apply for a personal loan conveniently right online.

5 Are there fees involved with a personal loan?

Personal loan fees vary from lender to lender, so it’s best to ask as you shop around for your personal loan. Credit Unions typically have lower interest rates and fewer fees than banks and other lenders, so be sure to shop your local credit union when in the market for a personal loan. Often these “hidden fees” aren’t easily apparent as you are comparison shopping interest rates. Some fees you may face when borrowing include an application fee, closing fee, commitment fee, document preparation fee, processing fee, and even a prepayment fee.  Always be sure to ask upfront, so there are no unpleasant surprises when you close the loan. The lowest rate may not be the best deal if the fees are extremely high.

6 Is there a limit to how much I can borrow with a personal loan?

The maximum you can borrow with a personal loan may vary from lender to lender. Most lenders will have a maximum amount you can borrow, as well as a maximum term. Your personal loan limit qualifications will also depend on your creditworthiness. Other factors that will determine the loan amount for which you qualify will be your income, your expenses and the purpose of the loan.

The bottom line when considering a personal loan 

Personal loans can be very useful when facing a multitude of financial needs. Their flexibility for use, the easy application process, and predictable payments can make them a good financing option for many borrowers.  Finally, a range of loan repayment terms can also help a borrower find a payment to fit their budget. Learn more about personal loans at Choice One Community Credit Union.