The options for personal loans are aplenty, especially if you have a good credit score. Most people use personal loans to bridge financial shortfalls. Many also avail personal loans to payback credit card debts which usually carries a higher interest.

The clear benefits of personal loans is, it does not require you to provide a collateral and the interest rates are competitive. At the same time, caution needs to be practiced when choosing the loan suitable to you; as being an unsecured loan, it’s more risky for the lender and thus you might not get the best rate.

While looking to narrow down a personal loan, look for the institution that offers competitive interest rates, wide availability of its network and transparency of process. The downsides to be aware are the high threshold you’ll have to meet to qualify (if your credit score is not great), providing a stable and sufficient income, solid savings history.

The reasons for availing a personal loan are many. It could be to consolidate debt, to pay for major personal expenses, home renovations etc. It is best to always keep in mind the exact amount of money you need while applying for a loan and its fixed monthly payment. If you choose to opt for a personal loan to consolidate your existing debt, so that you’ll have only a single payment each month, be aware that doing so may not reduce your debt or pay off your debt sooner. In some cases, the lower interest rate offered or the longer duration of the loan might appear as payment reduction. The hidden truth in most of these cases is, by extending your loan term, you may end up paying more interest on the loan.

Credit unions, unlike banks and other major financial institutions, offer the most affordable rates for personal loans, they might also offer loans to those with less than great credit scores.

Things needed to apply for a personal loan:

• Identification (license etc.)
• Address proof
• Proof of income (pay stub)
• Social security number
• Employer’s contact details

If you have a long standing relationship with your Bank, ask them for their lending rates. You might end up getting a good rate. Also, it’s worth spending time online and looking at options as online lenders are offering competitive rates especially for those with below average credit scores.

By considering all the above factors, you would be better placed to to decide if indeed personal loan is right for you.