If you need to get a personal loan, the timing couldn’t be better than right now. But you should still weigh the pros and cons of personal loans before applying for one. And right now, due to inflation, you should consider obtaining a personal loan sooner than later. Here’s what you need to know.
The Federal Reserve (“The Fed”) is raising interest rates again soon to help combat inflation. This means that personal loans with a fixed rate are becoming more expensive. And if you borrow money from a credit union or a bank, the interest rate you’ll pay is also likely to increase.
What does this mean for you? If you need to borrow money but can’t get a fixed-rate loan from your bank or credit union, now is the time to apply for a personal loan from an online lender. You’ll be able to get a lower interest rate and still have access to quick cash when you need it.
How to get a personal loan
Step 1: Decide how much money you need.
Before you begin applying for loans, you must first know how much money you need to borrow. Figure out how much you need vs. how much you can afford to pay. Too often, borrowers will get a loan for more than they need and then struggle to pay it back. On the other hand, borrowers who borrow too little end up in debt and have to borrow more to meet expenses.
Calculate your costs and budget thoroughly so you know how much you can truly afford and how that money will be spent.
Step 2: Build your credit score.
Building your credit score is essential because it can affect your ability to get loans, buy homes, or secure other forms of financing. A good score will show that you have a good history of paying your bills on time and a low chance of defaulting on any loans you take out in the future.
Step 3: Compare interest rates and terms.
There are two main types of interest rates: fixed and variable. Fixed interest rates remain the same regardless of the market conditions, while variable interest rates fluctuate with the market. For example, a fixed-interest rate mortgage might have a 3% annual rate, but if the market rate is 4%, that mortgage would also have a 4% rate. A variable-interest credit card might have an introductory APR of 0% for the first few months, but after that, it could go up to 21%.
For personal loans, you’ll want to compare fixed and variable interest rates to see which is better. Fixed rates are usually more affordable, but they can also be harder to come by. Variable rates, however, can be advantageous if you only need a small amount and can pay it off before the promotional rate expires.
Finally, read the terms of the loan. Look for things like interest rates, fees, and minimum payments. You’ll want to make sure you understand everything before you sign anything.
Step 4: Apply online.
Now that you’ve decided which type of loan is right for you, it’s time to apply. Most personal loans are available online, so you only need a computer and an internet connection.
To apply, go to your bank or credit union’s website and search for “personal loan.” You’ll see several different types of loans available, each with its own application process.
Once you’ve found the loan you want to apply for, click on the link “apply now.” You’ll be taken to a form where you can enter all of your information or choose to have a loan officer contact you about the loan.
If everything looks good and you’re ready to proceed, click “submit application.” Your application will be processed quickly, and you’ll receive a response within a few days telling you whether or not you’ve been approved for the loan.
The bottom line
Don’t wait to borrow money if you need it, as rising interest rates will add more to your total debt load. Apply for a personal loan sooner than later, and you’ll be in good shape.