Things you didn’t know you could do with a personal loan

Personal loans are installment loans with fixed monthly payments. Although they generally require you to have a good credit score to qualify, they can be a great choice for consumers who need some flexibility in how they spend their money.

Personal loans also tend to have lower annual percentage rates, or APRs, than traditional credit cards. According to The latest data from the Federal Reservein May 2022, the average interest rate for a 24-month personal loan was 8.73% while the average APR for interest-bearing credit cards (for cardholders who carried a balance) was 16, 65%.

If you’re considering taking out a personal loan to cover medical bills, home repairs, or other expenses, Select provides a more detailed look below at what you can and cannot use to pay for a personal loan.

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A few caveats about personal loans

The major advantage of a personal loan is that it is a lump sum of money that you can use to pay for most types of expenses. Many personal loan companies will provide you with the funds within a few business days, while some of them offer loans of up to $100,000.

There are, however, certain things that you are not allowed to pay with a personal loan. Check with your personal lender to see if there is anything specific they say you cannot use the funds for, as the lender may require you to repay the entire loan immediately with interest if you choose to. use it to cover prohibited expenses. .

Notably, most personal loans generally cannot be used to pay tuition, make a down payment on a home, or cover business-related costs. For this type of expense, it is better to opt for other types of credit or pay cash instead.

What can personal loans be used for

Other than that, personal loans can be used to pay for many things including wedding expenses, home repairs, medical expenses, a new car, moving expenses, household appliances, equipment. exercise and furniture, among other expensive items.

Personal loans can also be used for debt consolidation. With a debt consolidation loan, the new lender will pay off all your existing accounts, whether credit cards, student loans or other personal loans – you are then responsible for paying the personal lender a fixed monthly payment.

Debt consolidation can be helpful for those who are struggling to repay multiple loans or lines of credit. You should, however, make sure that you are not spending more interest with this type of loan than you would by making the payments on your existing accounts.

Select ranked Reached as one of the best debt consolidation loans for people with fair or average credit and LightStream as best for those with good or excellent credit.

Beginner personal loans

  • Annual Percentage Rate (APR)

  • Purpose of the loan

    Debt consolidation, credit card refinancing, marriage, moving or medical

  • Loan amounts

  • Terms

  • Credit needed

    FICO or Vantage score of 600 (but will accept applicants whose credit history is so poor that they have no credit score)

  • Assembly costs

    0% to 8% of target amount

  • Prepayment penalty

  • Late charge

    Greater of 5% of monthly amount past due or $15

LightStream Personal Loans

  • Annual Percentage Rate (APR)

    3.99% to 19.99%* when you sign up for autopay

  • Purpose of the loan

    Debt consolidation, renovation, car financing, medical expenses, marriage and more

  • Loan amounts

  • Terms

  • Credit needed

  • Assembly costs

  • Prepayment penalty

  • Late charge

Fees to know

There are several fees associated with personal loans that you should be aware of. For starters, you might encounter late fees if you don’t make your payment on time or prepayment penalty fees, intended to discourage borrowers from prepaying their loan, if you manage to repay your loan before the term of the loan term. ends.

Finally, there may be a an origination fee, or fee for making the loan, which is usually represented as a percentage of the loan and deducted from the original loan amount. Origination fees can vary from 1% to 5% and many lenders do not charge any origination fees, such as Marcus by Goldman Sachs Personal Loans and LightStreammentioned above.

Also select rated PenFed Personal Loans and Discover personal loans among the best personal lenders based on several factors, including no origination fees, no prepayment penalty fees, and the length of the approval process.

PenFed Personal Loans

  • Annual Percentage Rate (APR)

  • Purpose of the loan

    Debt consolidation, home improvement, medical bills, car financing and more

  • Loan amounts

  • Terms

  • Credit needed

  • Assembly costs

  • Prepayment penalty

  • Late charge

Discover personal loans

  • Annual Percentage Rate (APR)

  • Purpose of the loan

    Debt consolidation, home improvement, wedding or vacation

  • Loan amounts

  • Terms

    36, 48, 60, 72 and 84 months

  • Credit needed

  • Assembly costs

  • Prepayment penalty

  • Late charge

At the end of the line

There are very few things personal loans can’t pay for. However, it’s still important to check the fine print and terms of your loan, as using it for prohibited expenses could force you to pay it back immediately.

Check out Select’s in-depth coverage at personal finance, technology and tools, The well-being and more, and follow us on Facebook, instagram and Twitter to stay up to date.

Editorial note: Any opinions, analyses, criticisms or recommendations expressed in this article are those of Select’s editorial staff only and have not been reviewed, endorsed or otherwise endorsed by any third party.

About Lucille Thompson

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