A personal loan can provide the flexibility you need to cover planned and unplanned expenses without breaking your budget. But, what is a personal loan?
If you’re not familiar with personal loans, how they work, or why you might get one, Bowater Credit Union is here to help!
Understanding the Basics
Whether it’s cash for a special occasion, funds for tuition, money for home improvements, or consolidating debt, you can apply for the cash you need with a personal loan.
A personal loan is a type of installment loan. With installment loans, you’re approved for a set amount and will repay the loan at regular intervals or installments. The loan is disbursed to you in one lump-sum payment with your payment typically due on the same day of each month.
Personal loans offer a variety of interest rates depending on the lender, your credit score, payment history, and debt to income (DTI) ratio will be used to determine your personal loan interest rate. The better your credit score and payment history, the better interest rate you can expect.
How It Works
The first step to obtaining a personal loan is completing an application and waiting for approval, which can take a few hours or a few days. Once you’re approved, your funds are disbursed into your bank account. It’s your choice how to spend the money.
Don’t forget that you will begin the repayment process right away. Making on-time payments can help you build a positive credit history as your repayment history will be reported to the credit bureaus.
You may qualify for a lower monthly payment if you agree to pay off your loan over a longer stretch of time. Repayment timelines vary for personal loans, but they are generally between one and seven years. Save some money early on at Bowater Credit Union – we offer personal loans up to $25,000 with no fee to apply.
Common Uses
Once you know what a personal loan is, you need to know how to use it. Personal loans are diverse and flexible making how you use the funds totally up to you! Here are some of the most common reasons.
Consolidate Debt
If you have several different credit cards or other debt payments to make each month, it might be time to think about debt consolidation. Using a personal loan to consolidate debt can save you time and money. It also simplifies things and makes it easier to pay off debt and become debt-free.
Emergencies
Personal loans also work well for emergencies, such as surprise medical bills, an urgent roof replacement, or even funeral expenses. You can apply online and in some cases receive funding within a few business days, providing peace of mind and financial support when an emergency strikes.
Expensive Events
Your wedding day, honeymoon, or graduation party are all special events and you deserve for it to be everything you’ve ever wanted. Using a personal loan can help. You have the benefit of repaying your loan with fixed monthly payments and a fixed interest rate over time.
Home Renovations
Personal loans help for planned changes as well. If it’s time to redo your bathrooms, put in new kitchen appliances, or upgrade your landscaping, a personal loan might be the answer.
Qualifying for a Personal Loan
When you apply for a personal loan, you’ll need your personal and financial information. Our team will run a credit check, evaluate your debt to income ratio, and get back to you quickly with a decision. But there are a few things you can do to prepare.
Financial Information
Be ready to submit a variety of financial information such as bank statements, pay stubs, and tax forms upon formally applying for your personal loan. Having this ready sets up yourself and your lender for an efficient application process.
Credit Report and Credit Score
It’s a good idea to pull your own (free) credit report before applying for a personal loan. A higher credit score will give you a better chance at getting approved with the best rates and terms. If your credit score is on the lower end, dispute any errors on your credit reports and take steps to improve your credit score before applying.
Debt-to-Income (DTI) Ratio
Your DTI ratio is how much you owe compared to how much you earn. A lower DTI can help you qualify for a loan with good terms. If your ratio is on the higher end, consider paying off some of your debts or increasing your income.
A Personal Loan With Bowater Credit Union
A personal loan can be a helpful financial tool when you need money for a big expense or to consolidate debt. But it’s important to understand exactly what you’re agreeing to when you take out a personal loan. And you need to have a solid plan for repaying the loan.
At Bowater Credit Union, we stand ready to help you achieve your financial dreams. Click below for more helpful information on getting and using a personal loan for your needs!