While they are quite common, the ins and outs of personal loans are still unknown to many. Many of our credit union members wonder what benefits there are to obtaining a personal loan and whether they do more harm than good.

While it depends on your financial situation, personal loans can be very helpful. They can provide money in an emergency, help pay off high-interest debt, and build your credit score. Below we’ll review eight benefits of personal loans, situations where you would not want a personal loan, and Vocal’s options for personal loans.

What is a Personal Loan?

A personal loan is money lent by a credit union, bank, or other lender option that you pay back in fixed monthly payments over a period of time. Personal loans are typically unsecured, meaning you do not have to put down any collateral to secure a loan. Instead, lenders determine your loan eligibility and interest rates by looking at your credit and financial history, your credit score, and/or your debt-to-income ratio.

What is the Benefit of Obtaining a Personal Loan?

1. Consolidate High-Interest Debt

Personal loans can be a great way to roll multiple debts into a single loan, especially if you get a loan with a low interest rate. When you repay other debts with the money from a personal loan, you only have to manage one fixed monthly payment. This can even help you save money on interest, too.

2. Pay for Emergencies

Emergencies are often unavoidable, so it’s important to have an emergency savings account to cover any unexpected expenses. However, if you haven’t built up enough savings to cover an emergency—like a medical bill, job loss, or a broken down car—a personal loan can swoop in and save the day at a lower rate than you’d get by putting those expenses on a credit card.

3. Finance Your Wedding, Travels, Honeymoon, etc.

That’s right—You can get a personal loan for vacation use! When big life events come up, personal loans can help you cover these expenses so you can be part of the fun and pay off installments at a reasonable pace. Whether it’s traveling to your family reunion or hiking in Glacier, a personal loan can help you finance these adventures.

4. Predictable Payment Schedule

Consistency is key with a personal loan. The term and interest rate is fixed once you take out the loan, so you have one set amount to pay each month. Having a predictable monthly payment makes it easier for you to plan your monthly budget and work towards your financial goals.

If you are curious about how much you would pay each month for different loans, try our loan payment calculator.

5. Flexibility

Life is full of unexpected twists and turns, and personal loans can help you finance any expenses that come up along the way. This may include paying for the costs of a loved one’s funeral, starting a business, moving to a new apartment, or remodeling your office into a nursery.

6. Build Credit Score

If you’d like a better credit score, a personal loan could help. However, keep in mind that a low credit score may impact your ability to secure a personal loan at a manageable interest rate. High interest rates and fees may make paying off your loan difficult, which can end up damaging your credit score rather than helping it.

7. Pay for Purchases You Couldn’t on a Credit Card

Some credit cards have low monthly limits, making it difficult to finance large purchases. A personal loan can help out with this. Personal loans can range anywhere from a thousand to several thousands of dollars, depending on your credit score, debt-to-income ratio, and where you apply for a loan.

8. Pay Over Time Rather Than in One Lump Sum

Sometimes the up-front cost of a trip or medical bill can be overwhelming and, sometimes, impossible to pay off in full right away. A personal loan can help break the lump sum into smaller payments over a set period of time so you can pay off larger expenses in portions.

Vocal Personal Loans

We’re rooted in the Montana community, so we want our members to have personal loan options that fit their financial needs. At Vocal Credit Union, we offer fixed rates as low as 10.25% APR* up to 60 months. Below are several loan opportunities unique to Vocal Credit Union, and you can always make an appointment with one of our personal Loan Officers if you have any questions about loan options. Call (406) 442-1421 to schedule an appointment, or if you’re ready to apply, apply online here.

People Helping People Loan

• $1,000 maximum loan amount with a 6-month maximum term to repay.
• No credit score requirements for application.
• Proof of employment or income is required.

Intended for challenging times, not for ordinary lending circumstances.
We know life doesn’t always go as planned, so we designed our People Helping People Loan with this in mind. When you’re trying to make ends meet, the last thing you need is unmanageable debt. Our People Helping People Loan is an alternative to taking on the extreme fees and interest rates that often come with payday loans and short-term funding solutions. It’s a debt consolidation loan designed for the challenging times in life, such as when you’re having to choose between paying the rent and putting food on the table. No one should be forced to make a decision like that, so our People Helping People Loan offers a chance to make affordable loan payments, make financial health progress, and rebuild credit history. So borrowers don’t get in over their heads again, the maximum amount for this loan is $1,000.00, and the maximum term to repay is six months. We also can provide financial guidance to help you stay on track with payments in the future. Learn more about our People Helping People Loan here.

Vocal’s Visa Credit Card

All new Visa accounts come with a low 3.79% introductory rate for the first six months.
Beyond the first six months, current rates range from 8.99% – 17.99% based on approved credit and are fixed for the life of the card.
A credit card can be a great alternative to a personal loan if you have only a small expense to finance and have a reasonable interest rate. We offer a Visa credit card at manageable rates so you can use them to build your credit score, finance a dream purchase, and bridge the gap in a difficult time. Bonus, Vocal Visa card holders are not charged a penalty APR for late payments.

When Should I Not Obtain a Personal Loan?

In the end, you need to know you are in a place to pay back the money lent to you through a personal loan. Honestly evaluate your financial situation and goals before applying for a personal loan. If managing debt is tough for you, taking out additional funds may not be in your best interest. A good step towards managing debt is following a budget that accounts for your debt payments, needs, and wants. If you need advice for debt consolidation or best practices for financial health, contact us to speak with one of our team members—we can help point you in a direction that matches your current financial situation.

Here are other situations where obtaining a personal loan may not be your best option:

• If you have a low credit score.
• If you can afford to pay up-front with cash.
• If you struggle with maintaining monthly payments.

Apply for a Personal Loan Today

Credit unions are one of the best places to apply for a personal loan, especially Vocal Credit Union. In comparison to large-scale commercial banks, we offer lower interest rates and fees and have fewer minimum requirements for becoming a member. Also, we take pride in our reliable customer service, as we believe your finances deserve to be handled with care and intelligence—we want our members to have the best experience possible! If you’re in the local community and looking to apply for a Vocal Credit Union personal loan, apply online here or call (406) 442-1421 to speak with one of our knowledgeable Loan Officers.

*Annual Percentage Rate. On Approved Credit. Rates are subject to change without notice.