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A personal loan can be used for many things, so if you need money for a home renovation, to pay off credit cards, or to take a vacation, you may want to talk to a lender about taking out a personal loan rather than relying on your credit cards. Here's why a personal loan is often a good choice and some tips for applying for a loan.

Why A Personal Loan Is Better Than Credit Card Debt

One reason to choose a loan over putting the expense on a credit card is that the interest will probably be lower for a loan. That could mean the loan will be easier to pay down than a credit card would be. Plus, a personal loan has a fixed monthly payment for a fixed number of months. Every payment you make whittles away at the balance.

If you use the credit card for other things and only pay the minimum each month, it could take years to pay the card down. Plus, the minimum payment amount could change each month, and that could make it difficult to manage your finances. Also, a personal loan creates a mix of debt that may be more favorable to future lenders than a credit report that has only credit card debt.

How To Apply For A Personal Loan

To qualify for the loan, you need regular income, a good debt-to-income ratio, and a credit score above the minimum standard set by the lender. If you're looking to the future and have several months before you need to apply for a loan, you may want to clean up your credit report if you can. You might do this by paying down your credit cards as much as possible and making sure you don't have any late payments while you wait.

A good credit score helps you get the best terms for your loan and helps you avoid predatory lenders. It might still be possible to obtain a loan with bad credit, but be sure you understand the terms and check the interest rate so you can pay the loan off easily.

A personal loan doesn't require collateral, but you'll need documentation to prove your identity and income. Be sure you have all the documents you need before you apply for the loan so the application process goes smoothly and so you'll get a quick answer from the lender about your loan.

Applying for a loan doesn't always affect your credit score since lenders often do what's called a soft pull on your credit report when you're qualified for a loan. A hard pull, which goes on your credit report, may be done after you've agreed to the offer and submitted your paperwork to make the loan application official.

Talk to a lender, such as Ardmore Finance, to learn if you are eligible for a personal loan.