A personal loan can be a valuable tool for meeting your financial needs when used wisely. Keep reading to learn what a personal loan is, the advantages of using one, and when it could make sense to use as a financing option.

What is a Personal Loan?

A personal loan is a fixed-rate installment loan, which provides quick access to funds for various purposes. You’re often approved based on your creditworthiness, income, and overall debt levels. Since borrowers often apply for personal loans because of urgent needs, many lenders offer quick access to the funds once approved. The funds are usually disbursed in one lump sum.

Advantages of Personal Loans

• Fixed Interest Rates: Fixed interest rates give you a fixed monthly payment and offer protection against variable interest rates (rates that are subject to change based on market conditions).
• Fixed Monthly Payments: Personal loans usually come with fixed monthly payments, which makes them predictable and easy to budget for.
• Flexible Terms: Depending on the lender, loan terms can be as short as 1 year or as long as 5 years or more. This gives borrowers the flexibility to choose a term that won’t strain their budget and fits their priorities.
• No Collateral Required: Personal loans usually have no collateral requirement, meaning you aren’t risking your home or car if you are unable to repay the loan. However, be aware that without collateral – you typically face higher interest than a loan type with collateral backing it.
• Flexibility for Using Funds: Personal loans don’t have as many restrictions as some other loan types. They’re versatile and can be used for many purposes, such as consolidating multiple types of debt or funding a home renovation project.

When to Use a Personal Loan

• Debt Consolidation and Streamlining Payments: A personal loan makes it easy to take multiple payments and turn them into a single streamlined payment. This ultimately reduces the number of monthly payments you must make each month on other loans, making it less likely that you’ll miss payments. Additionally, consolidating multiple debt sources can lower the overall interest you’re paying – especially if your credit score has improved.
• Credit Card Payoff: The interest rate on a personal loan is usually lower than that of a credit card. Although the interest rate you secure on a personal loan will depend on your creditworthiness, the average national personal loan rate currently stands at 12.44% while credit cards stand around 19.61%. Additionally, interest rates on credit cards are usually variable. A personal loan with a fixed interest rate that’s lower than that of a credit card can help you pay down your credit card balances faster and save money on interest over time. If you’re consolidating credit card debt, commit to also changing your spending habits so you don’t go deeper into debt.
• Emergency Expenses: Sometimes the money just isn’t there when an emergency arises – such as an unexpected hospital stay, medical bill, or car repair. Personal loans tend to have quick approval and funding decisions, which makes them a helpful choice in an urgent situation. A personal loan can be a useful option in these situations, especially if the alternative is financing the expense with a credit card.
• Relocation Expenses: There are times when you can’t plan for a move, such as in the case of a job loss, family emergency, or a major life change. Moving can also come with unexpected costs. You may decide to use a personal loan to finance moving-related expenses such as hiring movers, renting a moving truck, or paying a security deposit or first month’s rent. A personal loan can help you cover these upfront expenses and pay them back with a predictable monthly payment.

A personal loan can offer predictability, structure, and flexibility when used appropriately. It can give you the confidence to meet your financial needs with a fixed interest rate and a predictable monthly payment.

If you’re in Monmouth or Ocean Counties in New Jersey and believe that a personal loan may be the right option for your financing needs, First Financial is here to help. With fixed rates, flexible terms up to 60 months, and no pre-payment penalties – our Personal Loans may be able to help you affordably cover the cost of life’s necessary expenses.* You can apply online 24/7 or call our Loan Department at 732.312.1500, Option 4 if you have any questions before applying.

*APR = Annual Percentage Rate. Actual rate will vary based on creditworthiness and loan term. Subject to credit approval. Personal Loan repayment terms range from 12 to 60 months, and APRs range from 10.24% APR to 18% APR. Loan payment example: A $2,000 Personal Loan financed at 10.24% APR for 24 months, would have a monthly payment amount of $92.51. A First Financial Federal Credit Union membership is required to obtain a Personal Loan or Line of Credit, and is open to anyone who lives, works, worships, volunteers or attends school in Monmouth or Ocean Counties. A $5 deposit in a base savings account is required for credit union membership prior to opening any other account/loan.