What is a Personal Loan and How Does it Work?

Do you have expenses that you fail to pay on a regular basis? Or maybe a huge pile of high-interest debt requiring monthly payments that barely even cover the interest charges?

Luckily for you, there is something JUST like that. It's called a personal loan and can significantly help your personal finances if used correctly. However, if you aren't careful, getting a personal loan could ADD to the debt you already owe on your credit cards

How Does it Work?

What is a Personal Loan? Put very simply, a personal loan is money that you take out from a lender which you'll then repay in monthly installments over the course of 2 to 7 years. In other words, it is a type of credit that you can use but also must repay, just like mortgages, student loans, credit cards, or a home equity loan.

Typically, a personal loan will have a lower rate than other loans so they can be very useful for consolidating multiple sources of your debt into one easy monthly payment.

How Do Personal Loans Work? Credit score: this gives banks and credit unions an objective thing to measure each and every person who applies for a personal loan.

– Credit history: maybe you've had a few unlucky breaks and your credit score isn't the best. Don't worry, your lender will also take into account your credit history so they'll know if you're consistently a poor credit user or if you have a pretty good track record overall.

Outstanding debt: how much debt you currently have also affects the amount that lenders will be willing to lend you. If you have mountains of debt already, it might be hard to get a loan without stipulations.

Personal Loan

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