What’s a Personal Loan and Are They a Good Idea?

Recent studies show that roughly 40% of Americans don’t have enough money in the bank to pay for a sudden $400 expense. 

If you’ve been living paycheck-to-paycheck for a few years now, we understand that you’d give almost anything to be able to experience even a little bit of financial security.

Many people rely on credit cards to get them through hard times, and still more people are currently paying off another kind of debt like a student or even car loan. However, credit card debt can quickly get you into a vicious cycle of interest rates and minimum payments that you can’t break out of.

And your past loans? You’re starting to wonder whether you’ll ever be able to pay them off. Plus, those past-due payments are destroying your credit score. So, what’s the solution?

For countless Americans, it’s a personal loan. But what’s a personal loan, and is applying for one the right choice for you? Read on to learn everything you need to know about taking out a personal loan.

What’s a Personal Loan?

First, let’s ensure you’re able to answer the most basic question, “What’s a personal loan, and how is it different from other kinds of lending options?”

Usually, a standard personal loan amount is anywhere from $500 all the way up to $100,000 depending on the terms of the loan, your credit history, and more.  But here’s how it’s different than other forms of lending: you don’t have to specify the ways in which you’re going to use the money, nor does the lender have to “approve” of the way you plan to spend it. This means you can use personal loans to consolidate your debt, pay for sudden medical bills, pay for much-needed home repairs, or even to establish an emergency fund.

Most personal loans are unsecured. So, what is an unsecured personal loan?

Essentially, this means that you don’t have to put up any kind of collateral on the loan itself. If you’re unable to make payments, you won’t have to worry about the lender seizing your home, car, or any of your personal property.

The Benefits of a Personal Loan

There are many reasons why people are taking out personal loans at a historically high rate in America.