Before we get started, there’s one thing you must remember — no two people are in the same financial situation. What works for one person, may not work for you. It’s important to research your options (or meet with a Financial Advisor). Opening a personal loan is a commitment. We’ll help you find out if it’s right for you.
What Makes a Personal Loan Useful
The benefit of a personal loan is in its simplicity and versatility. It’s a specific amount of money, for a set term, at a fixed rate. You know your payment amount and how many payments need to be made. And you can use it for nearly anything.
One of the best things about Connexus Personal Loans are the low rates. The average personal loan rate in the U.S. is more than 9.00% APR1 (see the current average). Right now at Connexus, we offer a promotional rate as low as 7.99% APR2. Find out how to access that rate.
What People Use Personal Loans For
Personal loans are more common than you may think. Here are the top three reasons people open personals loans:
1. Debt Consolidation
The average U.S. household that has debt, has $133,568 of it3. Most of those households have multiple forms of debt (credit card, auto loan, student loan, etc.). Instead of making monthly payments for each form of debt, they take out a personal loan to pay off the other debts. That way, they only have to make one payment. This works best when the personal loan has a low interest rate.
2. Dream Vacations
We’re not just talking about a road trip to the next state over. We’re talking about once-in-a-lifetime getaways. Dream vacations can cost a lot, and if you put that cost on your credit card, it could drown you in debt (the rewards points aren’t worth the debt). Instead, you can take out a personal loan, see the world, and then make affordable monthly payments at a lower rate.
3. Medical Expenses
Medical bills (ongoing or unexpected) are typically expensive. If you can’t comfortably pay for it right away, a personal loan may be one of your best options. Paying off your bills at a low rate could help you save money in the long run.
While those are the top three reasons, personal loans are also popular for moving expenses, weddings, large purchases, and more.
The Common Alternative: Credit Cards
The most common alternative to a personal loan is a credit card. They’re different types of products, but they’re often compared against each other.
Credit cards are great for small purchases and rewards points, but they have to be used wisely. If you can’t pay off your balance right away, it’s risky. Why? Because the national average credit card rate is 17.76% APR4. When you get buried in that kind of debt, it’s hard to get out. If you have a large purchase coming soon or debt that can be consolidated, a personal loan is a better option than a credit card.
An Inside Look at Ways to Get Approved for a Loan
There are certain requirements and standards you must meet to be approved for a loan. Here’s what you need to know:
Consider Improving Your Credit Score if it’s Below 640: A score below 640 is generally seen as subprime, which is risky for lenders. Learn how to find and improve your credit score.
Have a Manageable Level of Debt: If your amount of revolving and unsecured debt (credit cards, student loans, etc.) is more than 45% of your annual income, you may present too high of a risk. For example, if you make $40,000/year, you should have less than $18,000 of revolving and unsecured debt.
Request a Reasonable Amount: You have to make sure your monthly loan payments would fit within your budget.
If you do those three things, you’ll be in great shape to borrow money.
Is a Personal Loan Right For You?
If you need to borrow money, a personal loan could likely help you. It can be used for nearly anything, it has a low rate, and it’s a more affordable alternative to a credit card. If you’re still not sure whether a loan is the right option for you, call us at 800.845.5025. Our team is ready to look at your financial situation and recommend the best option for you.
1 APR. Annual Percentage Rate. To see current national average: https://www.connexuscu.org/loans/personal/.
2 To qualify for the lowest available rate of 7.99% APR enter promotion code LOWRATE between 7/8/2019 to 9/15/2019. Rate includes all available discounts. Minimum loan amount is $5,000. Maximum loan amount is $25,000. Certain restrictions may apply. Offer does not apply to Personal Loans currently financed at Connexus Credit Union. More details.
3 Average American household debt number based on the “2017 American Household Credit Card Debt Study” done by NerdWallet on www.NerdWallet.com (https://www.nerdwallet.com/blog/average-credit-card-debt-household/).
4 APR. Annual Percentage Rate. The national average credit card rate was 17.76% APR as of 7/15/18 according to www.creditcards.com.