In some cases, a personal loan is desirable.
You may want to start a home business, or you may want to borrow for a vacation, or you might have some other use for the money.
A personal loan — usually unsecured — can provide you with a little extra cash to help you meet your goals.
Actually securing that personal loan can be a bit difficult, though.
Here’s a few ways on how to get your pers0nal loan approved.
And if that doesn’t work, we have offer some other options, too.
Qualifying for a Personal Loan Through Your Bank or Credit Union
It’s becoming increasing difficult to qualify for a personal loan through your bank or credit union, especially if you want a larger amount.
If you are a good customer, and have good credit, you can usually get what is called a signature loan for $3,000 to $5,000. Check with your bank or credit union to find out whether they offer these loans, and what the application process is.
If you want a bigger loan, though, you will need to jump through some hoops. You will need to fill out a loan application, and you might even need to designate collateral. (Collateral is something of value that can be taken from you and sold to pay off the loan if you can’t pay it back.)
You will need to have a relatively high credit score (above 700 if you want to even be considered for an unsecured personal loan), and you likely not be approved for as much as you would like. (Not sure how your credit looks? Use services from Equifax, TrueCredit, and Credit Sesame to figure that out first.)
However, the interest rate on a personal loan at a bank that values you as a customer is usually quite low compared to the alternatives.
Other Options for Personal Loans
There are other options for personal loans, beyond your bank or credit union. Some of your other options include:
Many of us don’t think of credit cards as loans, but, in reality, your credit card constitutes a personal loan. If you have good credit, and you are hoping for a larger limit, you can apply for a new credit card. You can boost your available credit, and then draw on that for your personal use. However, credit cards usually have relatively high interest rates, and if you carry a balance, you could wind up paying quite a bit. Try to get a new card with an introductory period, and you will have an interest-free personal loan.
Here are some of the best credit cards you can get with a 0% introductory rate for either purchases or balance transfers:
- 0% introductory APR on purchases and balance transfers through November 2013
- 1% cash back on all purchases
- 50% bonus cash back on what you earn each year
- $100 bonus after you spend $500 in the first 3 months
- 0% APR on purchases for 6 months (then 10.99% to 19.99% dependent on credit score),
- 0% APR on balance transfers for 18 months (then 10.99% to 19.99% as above)
- (Read our full review of the Discover More Credit Card)
- 0% APR on purchases until May 2013
- 1 mile per dollar spent on the card
- 50% bonus on the miles you earn every year
- 0% APR on purchases until May 2013
- 1% cash back
- 50% bonus cash on what you earn each year
- (Read our full review of the Capital One® Spark Cash for Business Credit Card)
Peer to Peer (P2P) Lending:
One of the increasingly popular options right now is P2P lending. Whether you are financing a business, paying for college, or trying to buy a motorcycle, P2P lending can help. You will have to apply for the loan, and your credit will be checked.
Additionally, if you want to draw funding sources, you will need a plan, showing how you will use the money. P2P lending offers competitive interest rates, and a good story can help you get the funding you need.
Family and Friends:
If you have family members or friends who can help you out with the personal loan you need, you can often get the best loan terms.
However, you want to make sure that you are sure that you can repay the loan; you don’t want to risk your relationship. Have a contract so that you are accountable, and so that your friend or relative knows that you are serious.
Editor’s note: Personally, I’m totally against borrowing from family or friends. In my own family, money led to a huge falling out between family members. It shouldn’t have, but it did.
Final Thoughts on Personal Loans
If you are looking for a personal loan, there are a number of options. From payday lenders (which you should avoid as much as you can) to credit cards to friends and family to random strangers via P2P lending, chances are that you can find a personal loan. But, depending on your situation, you might have to pay a lot for it.
Whichever path to a personal loan you select, make sure you track your finances well using a budgeting tool like Mint or Manilla. You don’t want to have to take a personal loan out during a pinch and end up paying thousands in interest and late fees from mismanaging your money.