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Your Most-Googled Questions About Personal Loans Answered By An Expert



Select’s editorial team works independently to review financial products and write articles we think our readers will find useful. We may receive a commission when you click on links for products from our affiliate partners.

Personal loans can help you finance some of life’s large purchases without the astronomical interest charges that generally come with using a credit card. Personal loans are typically used for personal expenses — like a home renovation, wedding or even debt consolidation. They also typically carry a lower interest rate compared to credit cards, so they are usually an attractive financing option for someone who wants to avoid large interest charges.

Regardless of how you hope to use a personal loan, it’s always important to do your research to make sure it suits your financial needs. There’s a ton of information out there and parsing through it all can feel overwhelming.

So, Select gathered a list of the most-Googled questions about personal loans and asked expert Leslie Tayne, a financial attorney and Founder and Director of Tayne Law Group, to provide answers. Here’s everything you need to know:

How do personal loans work and how do you apply for one?

Personal loans are what’s known as installment credit. This means it’s a type of loan that must be repaid over a set period of time. It’s different from revolving credit, like credit cards, which involves the ability to borrow more money as you keep making payments.

“You’ll be approved for a lump sum amount,” Tayne said. “Each month, you’ll pay back portions of the loan in equal, fixed payments for a set period of time. The terms are generally based on your credit score.”

Interest charges will also be included in your monthly payment. The interest rate you pay is one of the terms that will be based on your credit score. Generally, the better your credit score is, the more favorable your loan terms will be. This could mean having a longer period of time to repay the loan and even waived origination fees.

But before you can get approved for a personal loan, you’ll need to go through an application process.

“The process can be completed over the phone, online, or at a bank,” Tayne said. “You’ll fill out the application form and the lender will run a credit check. “Once you are approved, the lender will deposit the funds directly into your checking account.”

How do I get a personal loan with bad credit? 

“It’s challenging but you can still get approved for a personal loan with bad credit — you might just pay a higher interest rate,” Tayne said. “Some lenders do have a minimum required credit score, so loans from these lenders won’t be available to someone with bad credit.”

You can always double check any credit score requirements with the lender before you apply. Payoff Personal Loan, for example, requires a FICO score of 640 or higher for approval. Some lenders may list their requirements on their website but if you can’t find them, it doesn’t hurt to ask the lender directly.

Payoff Personal Loans

  • Annual Percentage Rate (APR)

  • Loan purpose

    Debt consolidation/refinancing

  • Loan amounts

  • Terms

  • Credit needed

  • Origination fee

    0% to 5% (based on credit score and application)

  • Early payoff penalty

  • Late fee

    5% of monthly payment amount or $15, whichever is greater (with 15-day grace period)

According to Tayne, if you have bad credit you may also sometimes need a co-signer, or you may need to provide collateral to secure the loan. Securing the loan with a personal item, like a house or a car, means that the lender can seize that asset if you fail to make your loan payments.

If you have a lower credit score, you may also consider a lender that doesn’t charge any extra fees. An origination fee is calculated as a percentage of the loan amount and it can reduce the total loan balance you actually receive.

So if you’re looking at lenders that charge an origination fee, you might have to adjust the amount of money you’re requesting to accommodate for the cost of the fee. Otherwise, you might consider some lenders that don’t charge an origination fee at all, like LightStream or Discover, for example.

Of course, there are a ton of different options out there so comparing offers is one of the best ways to make sure you’re getting a personal loan with the best interest rate and payment terms. You can use this comparison tool from Even Financial to determine your top offers. The service is free, secure and won’t affect your credit score if you don’t apply for a loan.

Editorial note: The tool is provided and powered by Even Financial, a search and comparison engine that matches you with third-party lenders. Any information you provide is given directly to Even Financial. Select does not have access to any data you provide. Select may receive an affiliate commission from partner offers in the Even Financial tool. The commission does not influence the selection in order of offers.

What is the benefit to obtaining a personal loan? 

“There are some benefits to obtaining a personal loan, but it is often dependent on what your credit score is,” Tayne explained. “If you have a great credit score and can secure a low-interest loan, you can use the loan to make a large purchase that would have otherwise been paid for with a credit card.”

Credit cards tend to carry higher interest rates compared to personal loans, which means you’ll pay more overall when using a credit card to finance a purchase. So according to Tayne, using a personal loan with a lower interest rate essentially reduces the cost of the item. Of course, the best way to make sure your personal loan carries as low of an interest rate as possible is to make sure you maintain a good credit score.

At times, though, a credit card with a 0% APR period could potentially be a more affordable alternative to a personal loan. This is because you won’t pay any interest on the credit card charges for the specified introductory period. The Chase Freedom Flex℠ card, for example, lets you make purchases interest-free for the first 15 months (after, 14.99% to 23.74% variable). But for other options, Select rounded up some other credit cards with interest-free intro offers lasting 15, 18 and even 20 months.

Chase Freedom Flex℠

  • Rewards

    Earn 5% cash back on grocery store purchases (not including Target® or Walmart® purchases) on up to $12,000 spent in the first year, 5% cash back on up to $1,500 in combined purchases in bonus categories each quarter you activate (then 1%), 5% cash back on travel booked through the Chase Ultimate Rewards®, 3% cash back on dining and at drug stores, 1% cash back on all other purchases

  • Welcome bonus

    $200 cash back after you spend $500 on purchases in your first three months from account opening

  • Annual fee

  • Intro APR

    0% for the first 15 months on purchases

  • Regular APR

    14.99% to 23.74% variable

  • Balance transfer fee

    Either $5 or 5% of the amount of each transfer, whichever is greater

  • Foreign transaction fee

  • Credit needed

Is personal loan interest tax deductible? 

Some of your expenses can be deducted from your gross income to reduce the amount of taxes you’ll owe. In this situation, you’ll pay interest on your personal loan and you may be wondering if the interest you pay is tax deductible, similar to the home mortgage interest deduction.

According to Tayne, interest paid on a personal loan is generally not tax deductible. However, it may depend on the purpose of the loan. If you’re using it to cover business or education expenses (like paying tuition), then the interest may be tax deductible. But if you’re using the loan to cover a wedding or a home renovation, the interest charges are generally not tax deductible.

But before writing anything off, consult with your accountant to see what may and may not be tax deductible.

How much of a personal loan can I get? 

“That is dependent upon what the lender is willing to give you based on your credit history,” Tayne said. “Lenders may usually approve you for up to $100,000, but it depends on your income and credit score.”

If you aren’t sure how much a particular lender will approve, it doesn’t hurt to ask prior to submitting your application.

What is the average interest rate on a personal loan? 

“The rates can be anywhere from 9% to 14%,” Tayne explained. “However, there are some lenders with considerably lower rates. Sometimes, you can even get a reduced interest rate by setting up autopay and having your monthly payments made automatically.”

Autopay reduces the likelihood that you’ll make a late payment or miss a payment altogether. This is why some lenders are willing to give you a lower interest rate when you make monthly payments through autopay.

Lenders will also usually list the interest rate range available for their personal loans on their websites. But if you can’t find it online, you can always schedule an appointment with them to ask prior to submitting your application.

How long does it take to be approved for a personal loan? 

According to Tayne, it can take anywhere from one to seven days to be approved for a personal loan. Applicants can reduce the likelihood of any delays in the approval process by making sure they provide accurate information when filling out the application form.

Are personal loans bad? 

“There’s good debt and bad debt but it depends on what you’re doing with the loan and how it’s impacting you,” Tayne said. “Borrowing money you’re paying interest on will cost you more than paying in cash. It can be easy to finance an expense with a personal loan in some circumstances. And if it fits into your overall financial goals, then it’s a good thing. But if it’s a situation where you’re trying to push a round button into a square hole, then it might not be a good fit for you.”

She also explained that borrowers tend to take on personal loans with good intentions, but they later realize that it doesn’t fit within their budget. Or, external circumstances might also affect a borrower’s ability to manage their loan balance; a borrower who took out a loan last year but was laid off due to the pandemic might suddenly have a hard time paying back their loan — even if their budget previously allowed for some extra wiggle room.

You can’t control external circumstances like a pandemic. But when it comes to the things you can control, make sure you’re making the decisions that make sense for your financial situation. Think about if you really need the money and make a plan for how you’ll pay it back. And it always helps to have an emergency fund incase things do go awry.

Can personal loans build your credit? 

Personal loans can certainly help you improve your credit history. But there are also some instances where they can hurt you.

“If you don’t already have a lot of credit history, a personal loan can help you build positive payment history,” Tayne said. “And if you’re using the loan to pay off your credit cards, they can reduce your credit utilization rate. This can reflect positively on your credit report. But if the loan is only adding to your debt then it isn’t likely to help you build credit.”

Bottom line

Personal loans can be a great tool to help you build credit history or finance a large expense without paying high interest charges. However, like any other financial tool, they’re most advantageous when you have a plan for how you’ll use them.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.

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Are Sallie Mae Student Loans Federal or Private?



When you hear the name Sallie Mae, you probably think of student loans. There’s a good reason for that; Sallie Mae has a long history, during which time it has provided both federal and private student loans.

However, as of 2014, all of Sallie Mae’s student loans are private, and its federal loans have been sold to another servicer. Here’s what to know if you have a Sallie Mae loan or are considering taking one out.

What is Sallie Mae?

Sallie Mae is a company that currently offers private student loans. But it has taken a few forms over the years.

In 1972, Congress first created the Student Loan Marketing Association (SLMA) as a private, for-profit corporation. Congress gave SLMA, commonly called “Sallie Mae,” the status of a government-sponsored enterprise (GSE) to support the company in its mission to provide stability and liquidity to the student loan market as a warehouse for student loans.

However, in 2004, the structure and purpose of the company began to change. SLMA dissolved in late December of that year, and the SLM Corporation, or “Sallie Mae,” was formed in its place as a fully private-sector company without GSE status.

In 2014, the company underwent another big adjustment when Sallie Mae split to form Navient and Sallie Mae. Navient is a federal student loan servicer that manages existing student loan accounts. Meanwhile, Sallie Mae continues to offer private student loans and other financial products to consumers. If you took out a student loan with Sallie Mae prior to 2014, there’s a chance that it was a federal student loan under the now-defunct Federal Family Education Loan Program (FFELP).

At present, Sallie Mae owns 1.4 percent of student loans in the United States. In addition to private student loans, the bank also offers credit cards, personal loans and savings accounts to its customers, many of whom are college students.

What is the difference between private and federal student loans?

When you’re seeking financing to pay for college, you’ll have a big choice to make: federal versus private student loans. Both types of loans offer some benefits and drawbacks.

Federal student loans are educational loans that come from the U.S. government. Under the William D. Ford Federal Direct Loan Program, there are four types of federal student loans available to qualified borrowers.

With federal student loans, you typically do not need a co-signer or even a credit check. The loans also come with numerous benefits, such as the ability to adjust your repayment plan based on your income. You may also be able to pause payments with a forbearance or deferment and perhaps even qualify for some level of student loan forgiveness.

On the negative side, most federal student loans feature borrowing limits, so you might need to find supplemental funding or scholarships if your educational costs exceed federal loan maximums.

Private student loans are educational loans you can access from private lenders, such as banks, credit unions and online lenders. On the plus side, private student loans often feature higher loan amounts than you can access through federal funding. And if you or your co-signer has excellent credit, you may be able to secure a competitive interest rate as well.

As for drawbacks, private student loans don’t offer the valuable benefits that federal student borrowers can enjoy. You may also face higher interest rates or have a harder time qualifying for financing if you have bad credit.

Are Sallie Mae loans better than federal student loans?

In general, federal loans are the best first choice for student borrowers. Federal student loans offer numerous benefits that private loans do not. You’ll generally want to complete the Free Application for Federal Student Aid (FAFSA) and review federal funding options before applying for any type of private student loan — Sallie Mae loans included.

However, private student loans, like those offered by Sallie Mae, do have their place. In some cases, federal student aid, grants, scholarships, work-study programs and savings might not be enough to cover educational expenses. In these situations, private student loans may provide you with another way to pay for college.

If you do need to take out private student loans, Sallie Mae is a lender worth considering. It offers loans for a variety of needs, including undergrad, MBA school, medical school, dental school and law school. Its loans also feature 100 percent coverage, so you can find funding for all of your certified school expenses.

With that said, it’s always best to compare a few lenders before committing. All lenders evaluate income and credit score differently, so it’s possible that another lender could give you lower interest rates or more favorable terms.

The bottom line

Sallie Mae may be a good choice if you’re in the market for private student loans and other financial products. Just be sure to do your research upfront, as you should before you take out any form of financing. Comparing multiple offers always gives you the best chance of saving money.

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Tips to do some fall cleaning on your finances



Wealth manager, Harry Abrahamsen, has five simple ways to stay on top of the big financial picture.

PORTLAND, Maine — Keeping track of our financial stability is something we can all do, whether we have IRAs or 401ks or just a checking account. Harry J. Abrahamsen is the Founder of Abrahamsen Financial Group. He works with clients to create and grow their own wealth. Abrahamsen shares five financial tips, starting with knowing what you have. 

1. Analyze Your Finances Quarterly or Biannually

You want to make sure that your long-term strategy is congruent with your short-term strategy. If the short-term is not working out, you may need to adjust what you are doing to make sure your outcome produces the desired results you are looking to accomplish. It is just like setting sail on a voyage across the Atlantic Ocean. You know where you want to go and plot your course, but there are many factors that need to be considered to actually get you across and across safely. Your finances behave the exact same way. Check your current situation and make sure you are taking into consideration all of the various wealth-eroding factors that can take you completely off course.

With interest rates very low, now might be a good time to consider refinancing student loans or mortgages, or consolidating credit card debt. However, do so only if you need to or if you can create a positive cash flow. To ensure that you are saving the most by doing so, you must look at current payments, excluding taxes and insurance costs. This way you can do an apples-to-apples comparison.

The most important things to look for when reviewing your credit report is accuracy. Make sure the reporting agencies are reporting things actuary. If it doesn’t appear to be reporting correct and accurate information, you should consult with a reputable credit repair company to help you fix the incorrect information.

4. Savings and Retirement Accounts

The most important thing to consider when reviewing your savings and retirement accounts is to make sure the strategies match your short-term and long-term investment objectives. All too often people end up making decisions one at a time, at different times in their lives, with different people, under different circumstances. Having a sound strategy in place will allow you to view your finances with a macro-economic lens vs a micro-economic view. Stay the course and adjust accordingly from a risk and tax standpoint.

RELATED: Financial lessons learned through the pandemic

A great tip for lowering utility bills or car insurance premiums: Simply ask! There may be things you are not aware of that could save you hundreds of dollars every month. You just need to call all of the companies that you do business with to find out about cost-cutting strategies. 

RELATED: Overcome your fear of finances

To learn more about Abrahamsen Financial, click here

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How to Get a Loan Even with Bad Credit



Sana pwedeng mabura ang bad credit history as quickly and easily as paying off your utility bills, ‘no? Unfortunately, it takes time. And bago mo pa maayos ang bad credit mo, more often than not, kailangan mo na namang mag-avail ng panibagong loan. 

Good thing you can still get a loan even with bad credit, kahit na medyo limited ang options. How do you get a loan if you have bad credit? Alamin sa short guide na ito. 

For more finance tips, visit Moneymax.



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