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Personal loans can be an affordable way to borrow money when you need it -- especially when compared with most credit cards or high-interest consumer loans such as payday loans. But you're still going into debt when you take out a personal loan, so you need to be responsible about it.
Before you take money from a lender and commit to paying it back, you should make sure you can answer these six questions.
If you could use the funds to help you save money -- for instance, through debt consolidation -- then taking out a personal loan may be a good idea. Personal loans can also be a smart source of funding for expensive purchases you need to make, such as emergency home repairs.
But if you're trying to pay for a vacation or a big wedding, think twice about using a personal loan. You'll end up paying interest and making monthly payments for years for something that won't improve your financial situation in the long term.
When you need to borrow money, you want to do so in the most affordable way possible. So make sure a personal loan is indeed the cheapest way to borrow.
Personal loans have much lower interest rates than the standard APR on most credit cards -- but some cards offer a 0% promotional rate, and you may be better off with one of those if you can pay off the loan before the 0% rate expires. Or if you're borrowing money to buy a car, an auto loan may be a better and more affordable source of financing.
Make sure you consider total loan costs and other borrower benefits when you decide how best to secure funding.
Unless you're 100% sure you can make every loan payment by the deadline for the entire life of the loan, don't borrow. You'll ruin your credit, risk late fees and penalties, and put yourself in jeopardy of being sued if you borrow money you can't pay back.
Get the best rates and terms to fit your needs. Here are a few loans we'd like to highlight, including our award winners.
Many personal loans have a three- to five-year repayment schedule, but some allow you to pay back your loan over a shorter or longer repayment term. Understand how long you'll be in debt and consider how this will impact other financial goals you may hope to accomplish during that time frame, such as buying a home or starting a family.
Make sure you don't borrow unless you understand every aspect of your loan. This includes whether it's a variable or fixed-rate loan, whether there's an origination fee or prepayment penalties, and what your interest rate and APR will be.
You never want to take out a loan if you don't understand these things, as you could find yourself paying unexpected costs or, if you opt for a variable-rate loan, facing rising monthly payments.
Finally, you need to know not only what your monthly payments are, but also what the total loan cost will be, including the principal and interest. Only by understanding the total cost of the money you're borrowing can you decide whether the loan is worth it.
To avoid serious financial trouble, think carefully before you sign on the dotted line of a loan application. And make sure you can answer these six questions to help you take out an affordable loan that fits your needs.
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent, a Motley Fool service, does not cover all offers on the market. The Ascent has a dedicated team of editors and analysts focused on personal finance, and they follow the same set of publishing standards and editorial integrity while maintaining professional separation from the analysts and editors on other Motley Fool brands.
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent, a Motley Fool service, does not cover all offers on the market. The Ascent has a dedicated team of editors and analysts focused on personal finance, and they follow the same set of publishing standards and editorial integrity while maintaining professional separation from the analysts and editors on other Motley Fool brands.
Citi Personal Loan disclaimer:
**Rates as of 05-31-2024. Your APR may be as low as 11.49% or as high as 20.49% for the term of your loan. The lowest rate quoted assumes excellent credit and a loan term of 24 or 36 months. Your APR will depend on a variety of factors including your creditworthiness, term of loan, and existing relationship with Citi. For example, if you borrow $10,000 for 36 months at 15.99% APR, to repay your loan you will have to make 36 monthly payments of approximately $351.52.
There is a 0.5% APR discount if you enroll in automatic payments at loan origination. Additionally, existing Citigold and Citi Priority customers will receive a 0.25% discount to the interest rate. If you are in default, your APR may increase by 2.00%. No down payment is required. Rates subject to change without notice.
You must be at least 18 years of age (21 years of age in Puerto Rico). Co-applicants are not permitted. Loan proceeds cannot be used for post-secondary educational or business purposes.
If you apply online, you must agree to receive the loan note and all other account disclosures provided at loan origination in an electronic format and provide your signature electronically.
Credit cards issued by Citibank, N.A. or its affiliates, as well as Checking Plus and Ready Credit accounts, are not eligible for debt consolidation, and Citibank will not issue payoff checks for these accounts. If you are unsure of the issuer on the account, please visit https://www.citi.com/affiliatesproducts for a list of Citi products and affiliates.
*Upstart Loan Disclaimer
The full range of available rates varies by state. The average 3-year loan offered across all lenders using the Upstart platform will have an APR of 21.97% and 36 monthly payments of $35 per $1,000 borrowed. For example, the total cost of a $10,000 loan would be $12,646 including a $626 origination fee. APR is calculated based on 3-year rates offered in the last 1 month. There is no down payment and no prepayment penalty. Your APR will be determined based on your credit, income, and certain other information provided in your loan application.
Rates quoted are with AutoPay. Your loan terms are not guaranteed and may vary based on loan purpose, length of loan, loan amount, credit history and payment method (AutoPay or Invoice). AutoPay discount is only available when selected prior to loan funding. Rates without AutoPay are 0.50% points higher. To obtain a loan, you must complete an application on LightStream.com which may affect your credit score. You may be required to verify income, identity and other stated application information. Payment example: Monthly payments for a $10,000 loan at 8.49% APR with a term of 5 years would result in 60 monthly payments of $205.12. Some additional conditions and limitations apply. Advertised rates and terms are subject to change without notice. Truist Bank is an Equal Housing Lender. © 2024 Truist Financial Corporation. Truist, LightStream, and the LightStream logo are service marks of Truist Financial Corporation. All other trademarks are the property of their respective owners. Lending services provided by Truist Bank.