What is a Personal Loan?

If you are not very familiar with loans in general, you might have no idea what a personal loan actually is. It’s undoubtedly a term you’ve heard before, but what makes a personal loan any different than other types of loans? And — most importantly — how do you actually go about getting one?

What is a Personal Loan?

A personal loan is a type of loan that you can apply for personally, as the name implies. This means that the money is yours to use however you want. The lender isn’t going to ask you tons of questions regarding what it’s for or why you need it. You could use the money for pretty much anything, including buying a house, building a house, buying a car, making home improvements, or even to purchase something you really want but don’t actually need. Paying off loans with other loans is another possible use for the money you borrow.

How Much Money Can You borrow With a Personal Loan?

The amount of you money you can borrow with a personal loan depends on lots of things. You can’t necessarily just walk into the bank and ask for a specific amount — first, you’ll have to fill out a credit application to find out how much money the lender is willing to give you. So for example, if you need $5,000, there’s a chance you can only get approval for $3,000. But then, there’s also a chance you could be approved for much more. The first step is to let your lender know how much you need, and they’ll take it from there. As long as your credit is good, most lenders will do all they can to make sure you can borrow the amount you’re asking for.

Can You Get a Personal Loan if You Have Bad Credit?

If your credit is bad, you may not be able to get a personal loan. According to FICO, a score of 600 or below is poor while scores of 700 and above are generally considered good. Find out your score before applying so you’ll have a good idea of whether or not reputable lenders might work with you. Check with local banks in your area first, and if it appears that none are willing to extend credit to you, you might have to deal with a bad credit lender to get your money. Before you make the decision to get a personal loan through a bad credit lender, make sure you definitely need the money. If the money is for something that isn’t urgently needed, it might be best to put off borrowing it until you know that your score has improved enough so that you can deal with more reputable lenders. Bad credit lenders might loan you your money regardless of your credit score, but they will do so at very high rates of interest, which will ultimately make it harder for you to pay the money back.