Personal loans make sense when you’re looking to cover a large expense. So, maybe you want to go on vacation, do some renovations in your home, consolidate some credit card debt, and you’re looking for a loan where you can package that all together.
With a personal loan, which is specifically called an unsecured personal loan, there’s no collateral backing it up so interest rates are typically higher than the rates you’ll find on home equity loans or car loans.
There are cases when a personal loan is absolutely the right thing to do. A personal loan can be a lot cheaper than putting expenses on a credit card. You know what your monthly payment schedule is going to look like and your monthly payment is going to be the same every single month.
You can, of course, get a personal loan from your bank, but you should also shop credit unions. The other place to shop are peer-to-peer lenders.
If you want to get the best deal on a personal loan, the thing to do is work on your credit score. As your credit score goes up, the interest rate on your personal loan is going to go down.