What Are Personal Loans?

Key Takeaways

• Personal loans can be used for a variety of solutions, such as paying off existing credit card debt.
• Improving your credit score could save you thousands over the life of a personal loan.
• Some benefits include a quicker approval process, competitive interest rates, and no fees.

If you're in need of cash or perhaps looking to consolidate some of your credit card debt, an unsecured personal loan could be the solution. With competitive interest rates, flexible terms, and no application, disbursement, or origination fees, personal loans can help you borrow the money you need when you need it most.

Personal loans defined

Personal loans offer unsecured, fixed, or variable rates. They also offer several different term lengths. You can use a loan calculator before applying to estimate how much your monthly payment will be to make sure the payment fits into your monthly budget.

When to use a personal loan

The benefit of a personal loan is it can be used for a variety of purposes, including paying off existing credit card debt. Other uses for a personal loan may include offsetting the costs of adopting a child, financing a wedding, taking a dream vacation, or making a large purchase, such as furniture.

How is the interest rate on a personal loan determined?

Since personal loans aren't backed by collateral, lenders are going to take a close look at your credit score to make a decision. Generally, the higher your score, the better the interest rate you'll receive on your personal loan. A slightly better interest rate on a large personal loan could save you thousands in interest over the life of the loan, so it’s important to improve your credit score as much as possible before applying.

A personal loan may also help improve your credit score if you commit to making every payment on time. A strong track record of on-time payments is a key factor in maintaining good credit.

Benefits of personal loans

Consider the following benefits of personal loans to see if it’s an option that makes sense for you:

• Quicker approval process: In most instances, you will instantly know if you are approved for a personal loan. On average, you can have the funds from your personal loan in 7-10 days.
• Competitive interest rates and no fees: No application fees, no disbursement fees, and no origination fees.
• Consolidate debt and streamline payments: Instead of paying multiple credit card bills every month, you can use a personal loan to pay off the credit cards and then make one monthly payment each month (to the personal loan). With a competitive interest rate, you could save thousands of dollars in interest by consolidating your debt this way.

The bottom line

Personal loans can provide the funds you’re looking for to consolidate your debt, make that big purchase, or pay for a wedding. Review your finances before applying to ensure a personal loan is the right option to help you meet your financial goals.

More information

We are committed to helping you reach your potential by providing personalized solutions. Our dedicated colleagues can help you find the right product to help you reach your goals. To learn more, please call 1-888-333-0104, visit us online, or Ask a Citizen at your nearest Citizens Bank branch.