When financial institutions review your application for a personal loan, they will want to consider your credit score, debt-to-income ratio, credit history, personal assets, and the reason for requesting the loan.  All bankers need to “build a story” for why you are applying for credit so that the adjudicator approving the deal can understand why you need the credit and whether your application is a good risk for the lender.

Personal loans should never have origination fees or any prepayment penalties.  The loan should be open for you to make additional payments ahead of schedule, or in full at any time.  Personal loans do not require collateral like a mortgage (house is collateral) or car loan (vehicle is collateral) so there is no need for extra costs like title registrations or appraisals.

Personal loans are often used for debt consolidation, home improvements, to help fund a special event like a wedding, or even to pay for higher education.  Personal loans have specific terms and will often require payment within a  12-month to 60-month repayment schedule.  Your APR (annual percentage rate) will depend on the credit approval and banking guidelines of the lender.

Christine’s Tip:

Protect your credit, no matter how much you make.  There are many high-income earners who are very sloppy with their credit and get very upset when banks deny future credit or force the closure of credit.  In the past we used to be able to talk to lenders and persuade credit officers and adjudicators to take a chance on a client and be more lenient.  That doesn’t happen anymore.  Nowadays, bad credit equals higher rates or lending restriction to mitigate risk.  Most people do not realize how important good credit is until they don’t have it anymore. Don’t abuse it.  It will come back to bite you later, and you may be surprised at how big a bite it will take out of your future.