Personal loans can ease pressing money issues. However, many Americans today use the money from their personal for multiple other purposes. For example, financing home repairs,
catering to medical expenses or paying off debts. Personal loans can also come in handy to build your credit score or financial health. People with personal loans nearly doubled from 11 million in 2010 to about 21 million in 2020, while loan debt tripled from $55 billion to $162 billion, according to an official report.
The best credit unions offer a variety of loan options with personalized rates and flexible terms to navigate different life challenges, according to North Jersey Federal Credit Union.
Here’s a look at why personal loans from a credit union make sense.
How do Personal Loans Work?
A personal loan is a fixed-term financial product with a typically low annual percentage rate. You must pay it back with interest in monthly payments. The loan is closed once the amount is paid in full. There are two basic kinds of loans – Secured and Unsecured.
Secured loans are those that require you to offer collateral, which the lender can claim if you default on repaying the loan. Unsecured loans are those that do not require the borrower to furnish any assets against which the loan is taken. In case such a loan is not repaid, the lender can file a lawsuit to get back the debt with interest. Defaulting on payments also affects your credit score and dramatically increases borrowing costs in the future. So, it’s best to use a calculator before taking a loan, to figure out the monthly payment schedule and whether you can afford it.
Some entrepreneurs also raise personal loans to kickstart their startups, since credit constraints are quite normal for SMEs, says a report by OECD.
Why is Credit Union a Good Option?
A credit union is a member-owned non-profit organization that offers interest rate discounts and low fees, according to an article by Business Insider. Here’s a look at why they are a
good choice for raising personal loans. A credit union:
- Is highly accessible with additional services, rather than being big and formal like traditional banks.
- Assures an honest, transparent and open-minded process.
- Is less likely to have hidden fees and administration charges.
- Will be willing to work with you, even if you have an unsatisfactory credit score.
- Allows you to repay ahead of time or reschedule your payments without worries.
Credit unions are a more ‘human’ way of raising loans. Individual circumstances, obligations and responsibilities are taken into careful consideration. This is also a fine option if you have low tech experience. Credit union professionals are ready to guide you through the entire process, which makes this a community-focused and friendly choice for all.
