Personal loans can be a convenient and affordable alternative to credit cards for major life events.

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 want 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 that on 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 can 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 cover major planned expenses, such as a home improvement project or a wedding.

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

There are several benefits to choosing a personal loan, including flexibility. Some loan types can only be used for a certain purpose – a car loan for a vehicle, a 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 credit card limit.

Usually, you can get the funds you requested quickly. With RiverWind, we can get a response on whether 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 solely to improve your score, it is an added benefit, so long as you pay it off on time. 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.