Understanding the ins and outs of personal loans enables you to take advantage of this flexible form of financing for both planned and unplanned expenses — all while staying within budget.
Continue reading our personal loan FAQs to gain insight on how they work, why you might get one, and much more.
What Is a Personal Loan?
Personal loans are a type of loan that gives you a fixed amount of money distributed in a lump sum. They are generally used for one-time expenses.
What Are Some Uses of Personal Loans?
Personal loans have many uses, including, but not limited to:
- Debt consolidation
- Paying for a wedding or vacation
- Student loan repayment
- Financing home repairs
- Paying off medical expenses
What’s the Difference Between a Secured and an Unsecured Personal Loan?
A secured loan is backed by collateral — the value of a car, a savings account, or a certificate of deposit. Unsecured loans are based only on your credit history and ability to repay.
Do Personal Loans Offer a Fixed or Variable Interest Rate?
Personal loans come with fixed interest rates. Your payments with a personal loan will be the same each month. This is a great choice if you like the consistency of knowing exactly what your monthly payments will be over time.
What Type of Credit Score Do I Need to Qualify?
The higher your credit score, the more likely you are to receive the best interest rate.
Average credit scores fall into the following categories:
- 800-850: Exceptional credit
- 740-799: Very good credit
- 670-739: Good credit
- 580-669: Fair credit
- 300-579: Poor credit
Will Applying for a Personal Loan Affect My Credit?
Because a more thorough evaluation of your credit history is required to process personal loan applications, lenders will perform a hard credit check. This can affect your credit score, but not by much. It’s estimated that hard credit pulls only reduce your credit score by five points or less.
What Documentation Do I Need to Provide?
To complete a personal loan application, you will need to provide basic personal information as well as proof of employment and income. Employment and income information are used to prove you have stable funds to make your loan payments.
Expect to be asked for documentation like your most recent year-to-date pay stub, previous W-2s, personal tax returns, and/or a current personal financial statement.
What Should I Expect When I Apply with Greater Texas Credit Union?
Fill out our online application or apply at your local branch. Our team reviews applications in-house, offering quick approvals. We can finalize your loan documents via secure email or in person.
What if I Don’t Qualify on My Own?
If you are unable to qualify for a personal loan as the sole borrower, you could consider adding a co-borrower. This person is responsible for payments should you not be able to make them on your own. When applying with a co-borrower, both parties’ financial information and credit history are taken into consideration for approval.
How Can I Lower my Monthly Payments?
Repayment periods vary widely for personal loans. You’ll generally see terms of one to seven years, although it all depends on what your lender offers.
Generally, you can reduce your monthly payments by opting for a longer-term although you will pay more in interest over the life of your loan.
How Much Can I Borrow?
The maximum amount you can borrow with a Signature Loan from Greater Texas Credit Union is $10,000.
Can I Pay Off My Loan Early?
You can always pay off your loan early, but whether early repayment penalties apply to your loan is dependent on your lender.
When you borrow from Greater Texas Credit Union, we let you keep your hard-earned money by offering no prepayment penalties on all of our personal loans!
How Can I Avoid Delays in the Application Process?
Check your credit report before applying. Identifying and fixing errors as soon as possible is a simple way to avoid issues later on when you’re ready to complete your application.
Additionally, if you have time to spare, use it to your advantage and plan ahead. Pay down your debt to raise your credit score—it will improve your chances for approval and/or make you eligible for lower rates. A stronger credit score also lowers your debt-to-income ratio, which helps with approval as well.
What Fees Should I Expect?
Lenders charge various fees on personal loans from application processing fees to origination fees and more.
At Greater Texas Credit Union, we want to maximize your borrowing experience which is why we don’t charge origination or prepayment fees on personal loans.
Discover Personal Loans with Greater Texas Credit Union!
We hope these personal loan FAQs have helped you decide if it’s the best financing option for your needs.
If you’re still on the fence about whether a personal loan is right for you, we invite you to learn more about personal lending options with Greater Texas Credit Union. We offer our members flexible loans at highly competitive rates. Click below to learn more!