What is a personal loan?
A personal loan is funds borrowed from the credit union under particular loan terms. The loan terms include the specific amount of money borrowed, the loan term’s length, and the loan’s interest rate.
When applying for a personal loan, you request the specific loan amount needed from the credit union. The credit union determines your interest rate by the length of the loan term, type of personal loan, and in some loan types, your credit score.
What are personal loans used for?
People use personal loans for a variety of reasons. Some common uses include:
- Large purchases
- Small repairs
- Medical expenses
- Moving costs
- Funeral expenses
- Wedding expenses
- Vacation planning
- Emergency purchases such as a new furnace
- Miscellaneous expenses
Members use personal loans for almost anything. Borrow money for whatever, whenever you need funds. If you find yourself pondering where to get the money for something or worrying about maxing out your credit card, it’s time to consider a personal loan.
The difference of a personal loan.
The main difference between an unsecured personal loan and a secured loan is that a secured loan requires collateral. An unsecured loan does not require assets backing the loan. You become responsible for repayment without putting your assets in jeopardy.
Making a loan payment on a personal loan is different from repaying credit card debt. With a personal loan, you pay a fixed monthly payment until the end of the loan term, upon which you have repaid the debt. This is contrary to credit card debt, which requires a monthly minimum payment without any specified term length for repayment.