If you need cash fast, look into personal loans. Many people have heard of cash advances on credit cards and home equity loans, but those loan come with drawbacks that personal loans do not have.
Personal Loans Charge Lower Interest Than Most Credit Cards
Credit card interest rates are among the highest in the world of loans. The average credit card interest rate today is 20.21% according to data collected by The Balance¹. Compare that to good rates on personal loans, which can be 3.5% to 4.5%, and you see why paying off credit cards is a great use of a personal loan.
Consider a scenario where you have $25,000 in credit card debt and are making payments of $450. Making the same payment to a personal loan instead could clear your debt in a third of the time AND save you $45,000 in interest! See the table.Get Free Quotes
Paying $450/month on a $25,000 balance
|LOAN TYPE||AVG. RATE||MONTHS TO PAY OFF||INTEREST PAID|
|Credit card||20.21%||165 (~14 yrs)||$48,918|
|Personal loan||4.5%||63 (~5 yrs)||$3,086|
|Personal loan||3.5%||61 (~5 yrs)||$2,324|
Personal Loans Don't Put Your Home at Risk Like HELOCs Do
Personal loans are known as unsecured loans because you do not have to put up an asset as collateral. Thus, personal loans are lower risk because you are in no danger of losing your home. If you take out a home equity line of credit (HELOC) to obtain cash and are unable to make the payments, the bank could take your home.
People who think a cash advance from their credit card is the easiest way to get unfettered money for big expenses are delighted to see how much better the interest on a personal loan can be. The same amount of money you pay to a credit card company each month could be paid instead for a personal loan, and your money will go a lot further.
Personal Loans 101
A personal loan lets you borrow a sum of money over a fixed term. Most personal loans last one to five years, though in some cases you may be able to stretch the loan to 10 years.
Nearly all of the loan application and approval process happens conveniently online. Usually one verification phone call is all it takes to finalize the loan.
Am I eligible for a personal loan?
Some lenders offer an eligibility checker that will tell you how likely you are to be accepted for a particular loan. A 'soft check' like this does not hurt your credit score.
The Money Is Yours to Spend However You Like
Using a low-interest personal loan to pay off high-interest credit cards is a no-brainer, but you can spend the cash wherever you want. A personal loan can be a good choice if you want to:
- Fund home improvements
- Consolidate debts
- Pay for a wedding
- Cover unexpected medical expenses
- Pay for a once-in-a-lifetime vacation
Before taking out a personal loan, compare interest rates and terms. The annual percentage rate (APR) you see advertised might not be the one you get. Also check to see if there are any fees, and use them when comparing banks. Some loans come with initiation fees, and there may also be a fee for paying off your loan early. You can expect to find late payment fees because those are common with most any kind of loan.Get Free Quotes