What is a Personal Loan?

Person crunching the numbers with a calculator and a pencil.

A little extra cash can go a long way. Maybe you need to consolidate debt. Perhaps you have a medical expense that suddenly popped up. Or you’ve got your eyes on a shiny new toy. Personal loans can quickly provide you with the funds you want. They have fixed interest rates and don’t require you to put down collateral, which makes them an ideal option for many members. 

Learn more about personal loans, how to get one, and what you need to consider when looking for the one for your needs.

What are Personal Loans Used For?

Personal loans can be used for just about anything. Lenders typically offer personal loans ranging from $1,000 to $50,000. Common uses for personal loans include:

  • Debt consolidation
  • Medical expenses
  • Major life events such as weddings
  • Larger expenses (electric bike, vacations, etc.)
  • Emergencies

Get a Personal Loan from TwinStar Today

Are you interested in a personal loan? TwinStar offers personal loans up to $50,000. To see our latest rates, visit our personal loans page.

To apply for a personal loan, call us at 800.258.3115 or visit your local TwinStar branch.

How do Personal Loans Work?

Most personal loans are unsecured, meaning that you don’t have to put any collateral down. Lenders consider factors such as credit score, debt-to-income ratio, and cash flow when assessing whether to approve you. 

Once you’re approved, you should get the money you borrowed within a week. Your first payment is typically due 30 days after receiving those funds. Because personal loans have fixed interest rates, your monthly payments will stay the same for the entirety of a loan’s term. Most personal loans have repayment terms ranging from two to seven years.

How to Qualify for a Personal Loan

The better your credit profile is, the better your chances are of qualifying for a personal loan and getting a lower interest rate. If you have good credit (usually a credit score of 690 or higher), you’ll qualify for the best rates. If you have fair or bad credit, you can still get a personal loan from some lenders. However, you’ll most likely be paying a higher interest rate. 

To increase your chances of being approved, you might consider a secured personal loan. A secured loan is backed by an asset like your vehicle or home, which a lender can repossess if you default on the loan.

That said, make sure you have a clear financial goal in mind when applying for a personal loan, like consolidating debt. For more discretionary purchases such as a new boat, there may be more cost-effective options than personal loans.

How to Get a Personal Loan

You can apply online at most credit unions or banks, however, some credit unions and banks may require you to apply in person at one of their locations. 

Here are two steps you should take before applying for a personal loan:

  1. Check your credit. Your credit score plays a key role in the application process. Before you apply for a personal loan, check your credit score and resolve any issues that might be impacting your credit score. You can obtain a free credit report at Annual Credit Report.com.
  2. Pre-qualify. Depending on the lender, you may be able to pre-qualify for a personal loan, which allows you to preview the potential rate and term of the loan. There is a soft credit check during this process, meaning you can compare loan offers without it impacting your credit score. 

Applying for a Personal Loan

When you apply for a personal loan, you’ll need documents that verify your identity and income. It’s important to note that at this point, lenders will perform a hard credit check, which could temporarily lower your credit score by a few points. 

How to Determine if a Personal Loan is Right for You

Personal loans can provide you with greater financial flexibility. At the same time, they usually cost more than other types of loans. Personal loan annual percentage rates (APR) typically range from 6% to 36%. So, it’s important to compare APRs from different lenders before applying for a personal loan. 

In addition to a low APR, other key factors to consider are:

  • What’s your monthly payment. Does the amount you have to pay each month fit comfortably into your budget? If not, you may need to shop around more or consider different options.
  • Are there fees? There may be fees associated with a personal loan. The most common one being an origination fee, which essentially covers the cost of processing a loan. This fee is usually baked into the APR. You should ask lenders if they charge any fees.
  • How soon will you get funds? If you’re pressed for time, you’ll want to find and work with lenders who have fast approval/funding turnaround times.  

The bottom line when it comes to personal loans is to do your homework. Make sure you review your credit profile and address anything that may negatively affect your credit score. Don’t rush to apply for a personal loan before you research vendors and their rates. 

Being deliberate in your search will help you find the personal loan that best fits your needs and budget.  

To apply for a personal loan, apply online, call us at 800.258.3115 or visit your local TwinStar branch.