Personal loans can be a convenient and affordable alternative to credit cards when looking to pay for a major life moment.

There are a few things to consider – both positive and negative – before deciding whether or not a personal loan fits your needs.

Start out by asking two questions.

First, how much do you need?

Some places offer loans beginning as small as $500, but most lenders – including RiverWind Bank – offer a minimum of $1,000. If you need less than $500, it might be easier to save up extra cash in advance, or borrow the money from a friend or family member.

Second, what’s your credit score?

Before you start applying for personal loans, it’s important to know your credit score to make sure you can qualify. Most personal loan lenders are looking for applicants to have a good credit score. However, if you have an existing relationship with a bank, you may get approved for a favorable deal if you have a good history of paying bills on time and honoring the terms of your past loans and accounts. 

Now that you know the answers to those two questions, it’s good to know what kinds of things you can use a personal loan for.

There are multiple reasons to consider using a personal loan, including paying off or consolidating debt.

If you owe a substantial amount on one or more credit cards with high interest rates, using a personal loan to pay them off can save you money. Typically the interest on a personal loan is lower than most credit cards, assuming you have good credit. That will make it easier to pay off the debt more quickly.

You can also use a personal loan to pay off other high interest loans, like a payday loan, especially if you are able to get a lower interest rate. Before you go this route though, be sure to find out whether there's a prepayment penalty on the old loan. Those fees can sometimes be substantial.

If you’re looking to borrow money for a short amount of time, then a personal loan is a great option. Personal loans typically run from 12 to 60 months. So, if you need to borrow some money while you wait for a large payment to arrive, this is a good way to keep yourself afloat.

Major purchases can pop up at unexpected times. Maybe it's replacing an appliance that breaks down, having to make a major automotive repair, or a large medical bill. Taking out a personal loan can be a cheaper way to pay these off than using a credit card or financing through a seller.

A personal loan can also help with major planned expenses, like a home improvement project or wedding.

So, why should you choose a personal loan over other options? There are a lot of reasons.

There are a number of benefits to going with a personal loan, including flexibility. Some loan types can only be used for a certain purpose – car loan for a vehicle, home loan for a house – but a personal loan can be used for a variety of purposes including paying off bills or debt, or a major purchase.

Personal loans also typically come with a lower interest rate than credit cards, assuming you have a good credit score. You may also qualify for a higher loan amount than the limit on a credit card as well.

Usually, you can get your requested funds quickly. With RiverWind, we can have a response as to whether or not your loan is approved within 48 hours. 

A personal loan can also be really easy to manage. If you have multiple debts you’re dealing with, paying them off with a personal loan means you only have one debt to pay as opposed to multiple. As we mentioned before, this route could also save you money in the long run.

A personal loan can help your credit score. While we wouldn’t suggest taking out a loan purely for the purpose of helping your score, it is an added benefit, so long as you pay it off in a timely manner. If your credit report shows mostly credit card debt, adding a personal loan might also help your “credit mix.” Having different types of loans, and showing that you can handle them responsibly, is considered a plus for your score.