Things you didn’t know you could do with a personal loan

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Personal loans are installment loans with fixed monthly installments. While they typically require good credit to qualify, they can be a good choice for consumers who need some flexibility when it comes to how they spend their money.

Personal loans also typically have lower annual percentage rates, or APRs, than traditional credit cards. According to the latest data from the Federal Reserve, the average interest rate on a 24-month personal loan in May 2022 was 8.73%, while the average APR for credit cards with interest (for cardholders with funds) was 16.65%.

If you’re thinking about taking out a personal loan to cover medical bills, home repairs, or other expenses, Select below provides a closer look at what you can and can’t pay for with a personal loan.

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A few caveats about personal loans

The big advantage of a Personal loan is that it is a lump sum that allows you to pay most types of expenses. Many personal loan companies will get you the money within a few business days, while some of them offer loan amounts of up to $100,000.

However, there are some things that you are not allowed to pay for with a personal loan. Check with your personal lender if there’s anything specific you can’t use the money for, as the lender might require you to pay back the entire loan with interest immediately if you want to use it to cover prohibited expenses.

In particular, most personal loans typically cannot be used to pay college tuition, pay a down payment on a home, or cover business-related expenses. For such expenses, it is better to opt for other types of credit or pay with cash instead.

What personal loans can be used for

Aside from that, personal loans can be used to pay for many things including wedding expenses, home repairs, medical bills, a new car, moving expenses, appliances, exercise equipment, and furniture, among other large items.

Personal loans can also be used for debt consolidation. With a Debt consolidation loans have the new lender pay back all of your existing accounts, whether they are credit cards, student loans, or other personal loans – it is then your responsibility to pay the personal loan lender a fixed monthly payment.

Debt consolidation can be useful for those who are struggling to keep track of repaying multiple loans or lines of credit. However, you should make sure that you don’t spend more interest on this type of loan than you would if you were making the payments into your existing accounts.

Select ranked Upstart as one of the best debt consolidation loans for those with fair or average credit and LightStream as the best for those with good or excellent credit.

Outstanding Personal Loans

  • Annual Percentage Rate (APR)

  • loan purpose

    Debt consolidation, credit card refinance, wedding, relocation, or medical care

  • loan amounts

  • conditions

  • credit needed

    FICO or Vantage score of 600 (but will accept applicants with insufficient credit history to have a credit score)

  • incorporation fee

    0% to 8% of the target amount

  • Penalty for Early Payout

  • late fee

    The greater of 5% of the monthly amount past due or $15

LightStream Personal Loan

  • Annual Percentage Rate (APR)

    3.99% to 19.99%* when you sign up for Autopay

  • loan purpose

    Debt Consolidation, Home Improvement, Auto Financing, Medical Expense, Wedding and others

  • loan amounts

  • conditions

  • credit needed

  • incorporation fee

  • Penalty for Early Payout

  • late fee

fees to consider

Personal loans have some fees that you need to be aware of. For starters, you could expect a late fee if you don’t make your payment on time, or a prepayment penalty designed to discourage borrowers from repaying their loan early if you manage to repay your loan before the loan term ends.

After all, there can be one Closing fee or a fee for originating the loan, usually stated as a percentage of the loan and deducted from the loan amount up front. The closing fee can range from 1% to 5% and there are many lenders that do not charge a closing fee such as: B. Marcus of Goldman Sachs Personal Loans and LightStream mentioned above.

Select also ranked PenFed Personal Loans and Discover Personal Loans among the top lenders for personal loans based on several factors including no processing fees, no prepayment penalty fees and the length of the approval process.

PenFed Personal Loans

  • Annual Percentage Rate (APR)

  • loan purpose

    Debt Consolidation, Home Improvement, Medical Expense, Auto Financing and more

  • loan amounts

  • conditions

  • credit needed

  • incorporation fee

  • Penalty for Early Payout

  • late fee

Discover personal loans

  • Annual Percentage Rate (APR)

  • loan purpose

    Debt consolidation, home improvement, wedding or vacation

  • loan amounts

  • conditions

    36, 48, 60, 72 and 84 months

  • credit needed

  • incorporation fee

  • Penalty for Early Payout

  • late fee

bottom line

There are very few things that cannot be paid for with a personal loan. However, it’s still important to check the fine print and terms of your loan, as using it for prohibited expenses can result in you having to pay it back immediately.

Check out Select’s in-depth coverage of personal finance, technology and tools, wellbeing and more, and keep following us Facebook, Instagram and Twitter to stay up to date.

Editorial note: Any opinion, analysis, review, or recommendation expressed in this article is solely that of Select’s editors and has not been reviewed, approved, or otherwise endorsed by any third party.

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