3 Things to Know About Personal Loans

Personal loans are an important financial tool that many people use for various reasons, whether it's to consolidate debt, fund a big purchase, or handle an unexpected expense. Let's explore how personal loans work to help you select the most suitable option for your financial needs.

How do personal loans work?

Personal loans are installment loans with a fixed loan amount and monthly payment. Typically, lenders and financial institutions offer repayment periods that range between one and seven years.

The amount you can borrow is closely tied to your credit qualifications. Typically, borrowers can secure loans ranging from $1,000 to over $50,000. The specific rates, loan amounts, and repayment schedules are tailored to each borrower's creditworthiness, income, and other relevant criteria. When you’re approved for a personal loan, you'll receive the funds as a lump sum.

Do I need collateral?

Personal loans are unsecured, meaning the loan is not backed by collateral like your auto loan or home loan. Because unsecured loans don't require collateral, they tend to be harder to qualify for. If you have a strong credit score and financial history, you have a better chance of getting an unsecured loan with a lower interest rate. Having a lower credit score doesn’t mean you won't get approved but it does mean that your interest rate will likely be higher.

What can you use a personal loan for?

Personal loans can be used for a variety of purposes:

• Debt consolidation: Combining multiple high-interest debts into one lower-interest loan can potentially save money, simplify payments, and help you pay down your debt over a fixed period of time.
• Home renovations: Personal loans can be a funding option to renovate your home or complete repairs.
• Major purchases: You may use a personal loan to fund large expenses such as a wedding or a dream vacation.
• Medical expenses: If you have a medical emergency or ongoing medical costs, a personal loan can help manage these expenses.

If you're considering a personal loan, Pacific Service Credit Union is a great place to start. We offer personal loans with low rates and flexible terms designed to support your financial needs. For more information, visit our website or contact a member service representative at (888) 858-6878.