Should You Use a Personal Loan to Pay Off Debt?

While a personal loan may be easier to qualify for than other types of loans, it’s important to understand whether you might get a better interest rate with a different type of loan that’s appropriate for your situation. For example, if you’re looking to purchase a car, you may be able to get a lower rate on an auto loan than a personal loan.

Personal loans can be useful for consolidating and paying off debt. If you have high-cost debts (such as those on credit cards or payday loans), it could make sense to pay off those balances with a personal loan.

  • If you get a lower interest rate on the personal loan, you’ll spend less on interest overall, and more of each payment will go toward your loan balance.
  • You’ll have a fixed monthly payment that will pay off the loan by a specific date. Unlike credit cards with minimum payments that can allow debt to linger, personal loans are designed to be paid off in a certain time frame.

Before using a personal loan, you need to calculate if the strategy makes sense. Figure out how much you’re spending on interest, and compare that to any interest costs and origination fees for a new personal loan. You’ll want to ensure that using the personal loan ultimately helps you save money. If it doesn’t, it may not be the right move.

Where Can I Get a Personal Loan?

Personal loans are available from numerous sources. Online lenders offer personal loans with user-friendly application processes and competitive pricing. Also, local banks and credit unions can be an excellent source for personal loans. When you work with a local institution, you may have the opportunity to talk to a loan officer in person and discuss your finances in detail. Plus, you can potentially get same-day funding when you apply in person.

Consider getting quotes from at least three lenders, and compare interest rates, origination fees, and other loan features. Try to shop around and secure your loan within 30 days to reduce the number of inquiries to your credit, too. Take the time to decide the right length of repayment-the longer you take to repay, the more you’ll spend on interest. With all of this information in mind, you’ll be well-equipped to pick the right https://paydayloansohio.net/ lender.

How We Chose the Best Personal Loans

Our writers spent hours researching loan options from more than 50 different lenders. Recommendations are based on personal loan companies offering a combination of good interest rates, loan terms, low fees, loan amounts, speed of funding, and more. These loan recommendations take into account that all borrowers have different needs and financial situations that may require loans that meet various priorities. Not every recommendation is right for every borrower, so consider all of your options before applying.

*Your loan terms, including ount, term length, and your credit profile. Excellent credit is required to qualify for lowest rates. Rate is quoted with AutoPay discount. AutoPay discount is only available prior to loan funding. Rates without AutoPay may be higher. Subject to credit approval. Conditions and limitations apply. Advertised rates and terms are subject to change without notice.

Payment example: Monthly payments for a $10,000 loan at 5.95% APR with a term of 3 years would result in 36 monthly payments of $.

Upstart Personal Loan Details

Earnin might be a reasonable alternative. With Earnin, you can access funds based on hours you’ve worked at your job but haven’t yet been paid for. There are no fees, interest charges, or hidden costs, and you can cash out up to $100 per day. After your employer deposits funds into your account on payday, Earnin subtracts the amount you cashed out earlier.

Compare rates and fees available to you from a variety of sources, including personal loans and credit cards. Credit cards may have low promotional rates, but you need to accurately predict how quickly you’ll pay off your debt (ideally before any teaser rates expire). If you’re not confident about doing that, a personal loan with a lower fixed rate might be a better option.