Staff Contributor

What is a Personal Loan?

A personal loan is an agreement between you and the lender which allows you to borrow a certain amount of money for a specific purpose. The loan is typically repaid in either monthly payments or a lump sum and can be used for a variety of different things. Personal loans can be secured or unsecured, depending on the type of loan taken and the amount of money being borrowed. When the loan is secured, collateral must be provided in order to secure the loan, such as a personal asset or a property. Secured loans tend to offer lower interest rates, while unsecured loans do not. Personal loans typically have a fixed repayment schedule so that payments are made at regular intervals throughout the loan term.

 

What Can a Personal Loan be Used For?

Personal loans can be used for many different purposes, including debt consolidation, home improvements, vehicle purchases, and even vacations. They can also be used for large purchases such as furniture, electronics, an expensive wedding, or a new car. Personal loans are also often used for medical bills, education costs, and for the purpose of starting a business.

 

Types of Personal Loans

There are several different types of personal loans available depending on the borrower’s needs and the amount of money being borrowed. The most common types of personal loans include:

1. Secured Personal Loans: Secured personal loans require the lender to take a collateral asset in order to secure the loan. The collateral can be property or a valuable personal asset, such as a car, jewelry, or electronics.

2. Unsecured Personal Loans: Unsecured personal loans do not require any collateral, however, they typically offer higher interest rates and may not be available in certain cases.

3. Short-Term Personal Loans: Short-term personal loans are typically used for specific purchases and are repaid over a short period of time. They typically come with higher interest rates and do not usually give you the amount of time needed to really make the payments.

4. Long-Term Personal Loans: Long-term personal loans are designed for larger purchases and are repaid over a longer period of time with lower interest rates. These loans may come with fixed or variable interest rates, depending on the lender.

 

Personal Loans and Co-parents

When getting a pesonal loan, it is important for divorced and separated parents to understand their financial picture, what options are available, and how to evaluate loan terms. By understanding the fine print of possible loans, divorced and separated parents can be sure to make the best financial decision for themselves and their circumstances.

 

The first step in evaluating personal loan terms is to carefully assess the cost of the loan. Evaluating the loan's Annual Percentage Rate (APR)—which is the total yearly cost of a loan, including any associated fees—is the best way for divorced and separated parents to assess potential loans. Additionally, looking at any potential fees related to the application process and loan itself, such as origination fees or closing costs, can be a helpful factor in determining the overall cost of a loan.

 

The second step in evaluating personal loans is to understand the repayment terms. The repayment terms of a loan refer to how long the loan must be paid back and under what schedule, as well as whether or not the loan has a variable or fixed interest rate. Different lending institutions may offer different repayment terms, and divorced and separated parents should compare these terms to determine which one is best for them personally. Moreover, it is important to consider the length of the loan and if it can be paid back early without any penalty. Being aware of the repayment terms is essential for divorced and separated parents to understand their financial commitments and ensure that the loan does not become a financial burden.

 

These factors combined can be rather complicated, so it is highly beneficial for divorced and separated parents to speak to a financial advisor or counselor—such as a Certified Financial Planner (CFP) or Chartered Investment Manager (CIMA)—who can provide valuable insight and advice. "Financial counselors and advisors can provide the education and practical guidance to help divorcing and separated parents understand their loan options and make an informed decision." said CFP Pamela Capalad. "It’s essential to gain as much information as possible when evaluating terms of a personal loan, and professional guidance can be a helpful resource in this process."

 

It is also helpful for divorced and separated parents to consult with family and friends who have experience with debt consolidation or personal loans. This can provide additional insight into lenders and loan terms and lead to a more informed decision.

 

There are a variety of loan companies that offer personal loans for divorced and separated parents, and it is important to compare and contrast options to find the terms that fit your specific financial needs. "When considering a personal loan, do your research," recommends CFP Daniel Mahgerefteh. "Check out several lenders to compare interest rate, repayment terms, and fees, so that you can make sure you’re getting the best deal for your situation.” Additionally, financial advisors and counselors suggest that divorced and separated parents consider loan consolidation to manage payments. “Debt consolidation is often a good option for those looking to combine multiple loans into one loan with a lower interest rate,” said CFP Andrea Blackwelder.

 

Credit unions and local banks are often the best places to start when seeking a personal loan, as they can be less expensive than online lenders and often have more flexible terms. However, the decision of where to get a loan should ultimately be determined by the divorced or separated parent's individual circumstances.

 

Finally, some lenders require collateral for a loan, although having a good credit score and trustworthy co-signer can sometimes make up for this requirement. Paying on time and building positive credit is important for divorced and separated parents to ensure financial stability post-divorce. CFP Colby Mann recommends, “Resist any temptation to miss loan payments, avoid taking out too many loans, and build your credit score to open more opportunities in the future.”

 

 

25 Tips from Financial Advisors who have CFP, CIMA for getting a Personal Loan

Personal loans can be a convenient way to get access to the money you need to cover various expenses. Whether you're looking to pay off debt, make a major purchase, or cover the cost of an unexpected event, personal loans can be an attractive option. However, applying for a loan is serious business and money management, and it’s not a decision to be taken lightly.

 

Having a CFP, CIMA provides financial advisors the highest level of financial advice and expertise. To help you make informed decisions about your personal loan process, we’ve gathered 25 tips from financial advisors who have earned the CFP and CIMA designations. Read on for key advice about getting a personal loan.

 

1. Know your options. When it comes to personal loans, it’s important to know your options and understand the different types of loans available. For example, unsecured loans are not backed by collateral, while secured loans are supported by collateral such as a car, house or other assets. Knowing whether you’re looking for a secured or unsecured loan and understanding the associated pros and cons can help you make a more informed loan decision.
2. Make sure you can afford the loan. Before applying for a personal loan, take a good look at your budget and make sure you can afford the loan payments. Even if you’re approved for the loan, if you’re not able to make the payments, you could be putting your finances and credit at risk.
3. Consider your credit score. When it comes to taking on debt, your credit score is key. Make sure you check your credit score and understand where you stand. Many lenders will pull your credit report before approving a loan, and having good or excellent credit can often help you get better rates and terms on a personal loan.
4. Shop around for the best terms. It’s important to do your due diligence and shop around for the best rate and terms for your loan. To ensure you’re getting the most competitive terms, compare multiple loan offers from different lenders and look for the lowest overall cost.
5. Ask about prepayment penalties. If you plan to pay off your loan early, it’s important to ask the lender if there are any prepayment penalties. Some lenders will charge fees or a percentage of the loan balance if you pay the loan off too soon, so be sure to ask about this before signing the loan agreement.
6. Know the fees involved. In addition to the interest rate, paying attention to the loan’s fees is crucial. Lenders will typically charge an origination fee up front, as well as other fees such as late payment fees or fees for extending the loan. Pay close attention to these fees to make sure you’re getting the best deal possible.
7. Find out if the loan requires collateral. In some cases, loan providers may require collateral to secure the loan. You should find out if the lender requires collateral before taking out any loan. Collateral may include a home, car or other valuable asset, so know your options and be sure to consider the associated risks before taking on a loan secured by collateral.
8. Don’t be afraid to ask questions. Before signing a loan agreement, take some time to ask questions. For example, find out what the total cost of the loan will be, including the interest rate and any fees. Also, ask if you’ll need to make payments via direct deposit or if automatic payments are available.
9. Compare your loan options to other financial products. When considering taking out a loan, it’s important to compare it to other financial products such as a credit card or home equity loan. For example, credit cards typically have a higher interest rate, but may offer more flexibility in terms of repayment.
10. Know the terms and conditions of the loan. Before signing a loan agreement, make sure you understand the terms and conditions of the loan. Take the time to read the loan agreement and be aware of any fees, late payment penalties and other important details included in the agreement.
11. Consider using comparison sites. To make the personal loan process easier, consider using comparison sites to compare loan offers from various lenders. This can help you save time in the loan shopping process and get the best deal possible.
12. Check lender reviews online. When considering a particular lender, researching online reviews and customer feedback can be a good way to get an idea of what to expect. Use reviews to make sure you’re dealing with a reputable lender, and make sure the lender’s goals align with yours.
13. Start the application process early. Before submitting a loan application, make sure you give yourself enough time to get approved. Applying for a loan can take several weeks or even longer, so start the process early to ensure you have enough time for approval.
14. Get all the paperwork in order. The loan application process can require a lot of paperwork. To make the process easier and reduce the amount of time needed for approval, get all your documents in order before applying. This includes bank statements, pay stubs, tax returns, credit reports and other documentation the lender may require.
15. Keep track of your loan payments. Once you’ve taken out the loan, it’s important to keep track of your payments and make sure you’re meeting your payment deadlines. Set up payment reminders and keep your lender up to date on any changes to your financial situation.
16. Make payments on time. Making timely payments on your loan is key to keeping your credit score healthy. Make sure you always pay your loan payments on time and to the best of your ability. Late payments or missed payments can have a negative impact on your credit history and can result in late fees.
17. Don’t borrow more than you need. When taking out a personal loan, try to borrow only what you need to cover your expenses. Taking out too much money can put a strain on your budget, and if you’re unable to pay the loan back, it could damage your credit score.
18. Double check the loan agreement. Before signing the loan agreement, make sure you double check the paperwork to ensure it includes all the details you discussed with the lender. There may be additional requirements you didn’t expect, so read the loan agreement thoroughly to make sure you understand all the terms.
19. Clarify whether you need a co-signer. If you don’t have a good credit score or sufficient income to qualify for a personal loan, you may need to enlist the help of a co-signer. Before signing up for a loan, it’s important to clarify whether you need a co-signer or not.
20. Negotiate the loan terms. Before signing the loan agreement, you may be able to negotiate certain loan terms. Negotiating the interest rate or down payment can save you money in the long run and can help you get a better deal on your loan.
21. Disclose all your debts. When applying for a personal loan, make sure you disclose all your debts and liabilities to the lender. If you’re not honest, you could get denied for the loan or be stuck with a higher interest rate.
22. Get prequalified before applying. Before formally submitting a loan application, get prequalified with the lender. This can give you a better idea of what you can expect for a loan and the terms you’ll be offered.
23. Use the loan for the intended purpose. Before taking out a loan, make sure you plan to use it for the purpose it was intended. For example, if you’re taking out a loan to consolidate debt, make sure you don’t use the loan to take on new debt.
24. Choose the shortest repayment term possible. The length of the loan repayment term is an important factor to consider when taking out a loan. To save more in the long run, try to find a loan with the shortest repayment term possible. This can help you pay off the loan faster and reduce the amount of interest you’ll pay.
25. Monitor your credit report. When considering loan applications, lenders can check your credit score and report to assess your creditworthiness. If you’ve recently taken out a loan, monitor your credit report and make sure all the information is accurate. You can also use credit monitoring services to help keep tabs on your credit report.

 

Top 10 Personal Loans Issuers 

1. Marcus by Goldman Sachs: Marcus by Goldman Sachs offers a range of personal loans for a variety of uses, including debt consolidation, home improvement, and more. The interest rates range from 6.99%-19.99%, and repayment terms can be up to 6 years. The loan amounts are also flexible, ranging from $3,500-$40,000.
2. SoFi: SoFi offers personal loans ranging from $5,000 to $100,000. It also has some of the lowest rates on the market, with APRs ranging from 6.99%-19.99%. It also offers a wide variety of repayment arrangements and repayment periods.
3. LightStream: LightStream provides personal loans for those who need cash quickly. The loan amounts are up to $100,000 and the rates are as low as 4.99%. The repayment period can be up to 12 years, depending on the loan amount.
4. Upstart: Upstart offers loans for those with less-than-perfect credit. The loan amounts range from $1,000 to $50,000 and the APRs range from 6.94%-35.99%. The repayment periods can be up to 5 years in length.
5. BestEgg: BestEgg offers loans ranging from $2,000 to $35,000 and rates vary from 5.99%-29.99%. Bestegg also has the ability to turn around loans quickly, with most loans being approved and funded within one business day.
6. Lending Club: With loan amounts ranging from $1,000 to $40,000 and repayment terms up to 5 years, Lending Club offers some of the most competitive repayment terms out there. The interest rates vary from 6.95%-35.89%.
7. Avant: Avant offers personal loans from $1,000 to $35,000 with APRs ranging from 9.95%-35.99%. It allows for repayment periods of up to 5 years, making it a good choice for larger purchases.
8. Payoff: Payoff offers loans ranging from $5,000 to $35,000 with APRs ranging from 5.99%-24.99%. It offers some of the shortest repayment terms on the market, ranging from two to five years and has very competitive interest rates.
9. Prosper: Prosper provides personal loans up to $35,000 with repayment terms up to 5 years. The APR ranges from 6.95%-35.99%. Life events such as weddings, vacations, and home repairs can be funded with a Prosper loan.
10. LendingPoint: LendingPoint offers loans up to $25,000 with APRs ranging from 9.99%-35.99%. It offers quick turnarounds on loan applications with an average of 3 days for a loan to be approved and funded.

 

Personal loans are a great option for those who need cash quickly. They are an ideal solution for financing higher-priced items or for consolidating debt. Personal loans can be secured or unsecured depending on the type of loan and amount borrowed. Rates and terms vary from lender to lender, so it’s important to shop around to get the best deal. Taking out a personal loan is a major financial decision and can have long-term implications on your finances. It is essential for divorced and separated parents to properly evaluate any potential loan terms before making a final decision. It is important to assess the overall cost of a loan, become familiar with the repayment terms, and get advice from financial advisors and counselors. Additionally, consulting with experienced family and friends can further put discarded and separated parents in the same direction as they seek their ideal loan terms. With the right advice and insight, divorced and separated parents can easily find the best loan terms to match their financial needs.

Warning:  This post is neither financial, health, legal, or personal advice nor a substitute for the advice offered by a professional. These are serious matters, and the help of a professional is recommended as it can impact your future.