Tips for Choosing Personal Loans for Emergencies

posted on Monday, July 25, 2022 in Financial Tips

If you suddenly need a large amount of money to pay off a medical expense, car repair, or debt, emergency loans can come in handy. There are a few types of emergency loans, but one of the most commonly used types is personal loans.

These personal loans for emergencies are offered by financial institutions and lenders that are often unsecured. This means that you won’t have to provide any type of collateral. It’s a quick and easy way to get a loan to pay off whatever you need. If you need to apply for a loan, here are a few things you need to learn on how to choose one:

Know the Loan’s Repayment Terms

Emergency loans, especially personal loans, may have varying repayment terms depending on the lender and the type of loan. Some loans may only take you a couple of months, while others can last for years. Some may also require you to pay a minimum amount every month, so be sure to check on these before applying.

Have a Good Credit Score

It’s no surprise that having a good credit score can help you get a bigger loan faster since the lender will be sure that you can pay it off properly in no time. You’ll also have more options than someone with bad credit. Good credit can give you extra benefits like low-interest rates and more flexible payment terms.

Depending on your lender, you may have to meet a credit score threshold before you get approved. This can make a significant impact on what you’ll get on your loan.

Familiarize Yourself With the Loan’s Fees

Many personal loans may charge you fees. These additional fees can have an impact on your loan’s total cost. One common fee would be the origination fee. This is a payment that you need to pay when the lender has approved your loan, and the money has been sent to your account. It would typically cost you 1-6% of the loan’s amount.

Another fee would be the late payment fees. These are charged to you whenever you fail to pay your loan on time. Oftentimes, they are a flat amount or a small percentage of your usual payment. These reduce the risk for the lender and encourage the borrower to pay on time.

Consider the Interest Rate

The interest rate can also make an impact on your decision to get an emergency loan. On average, some lenders may offer personal loans with interest as low as 10% for those with good credit scores. Your debt-to-income ratio can also play a role in the interest rate that you’ll get.

Personal loans can help you achieve your financial goals. If you’re thinking of applying for a loan for whatever purpose that you need, talk to one of our C1st representatives today at Community 1st Credit Union.