7 Benefits of Getting a Personal Loan

If you’ve ever needed extra funds to repair your car, cover an unexpected bill or make home improvements, you may have considered taking out a personal loan. So, what exactly is a personal loan, and what are the benefits?

A personal loan is a lump sum of money you can borrow from a lender, bank or credit union and repay in fixed monthly payments, which include interest (the cost of borrowing). You can use a personal loan to cover various expenses, like paying off debt or paying emergency expenses. If you're on the fence about applying for a loan, understanding the benefits may help you make the decision that fits your budget.

Let's go over seven common benefits of getting a personal loan.

1. Choose loan options that fit your credit needs

You may be able to find a personal loan that fits your personal situation. Depending on the lender, you could choose between a secured or unsecured loan, which gives you options based on your creditworthiness and financial need.

A secured loan is backed by collateral, which is something valuable you possess, like a car. If you don’t repay the loan, the lender has the right to take possession of the collateral to recover the remaining amount owed.

On the other hand, an unsecured loan doesn’t require collateral. Instead, lenders rely more heavily on factors like your credit history and income to decide if you qualify.

Since secured loans are backed with collateral, they may boost your borrowing power, sometimes giving you a lower interest rate, lower monthly payment or a higher loan amount. Secured loans could be helpful if you have less-than-perfect credit or if your application for an unsecured loan was declined.

2. Use your loan for almost anything

Personal loans are versatile, and you can use them for many purposes. Keep in mind that lenders have some rules on how the loan can be used, so be sure to check with them about their policies.

You can use a personal loan for costs like:

• Travel
• Moving expenses
• Credit card debt consolidation
• Auto repairs
• Household expenses

It's important to note that many lenders, including OneMain, don’t offer personal loans for business use or educational expenses.

3. Get the money you need fast

If you’re facing an emergency, a personal loan could provide the funds you need quickly. Many lenders offer quick approval and even faster funding, sometimes as soon as the same day. Getting a loan from OneMain could take as little as a day. You may complete your application and see your offers in minutes, and you could receive funds as fast as one hour after signing your loan agreement documents.^†

The ability to get money quickly could help you resolve an urgent situation without worrying about finding funds elsewhere.

4. Receive your funds all at once

Unlike revolving credit, like a credit card that lets you borrow and repay money up to a set limit, a personal loan allows you to borrow a lump sum all at once. Getting money in a lump sum is particularly useful for large, one-time expenses or purchases. At OneMain, borrowing amounts range from $1,500–$20,000.^‡

5. Know exactly what you’ll pay each month

One of the main benefits of a personal loan is its predictability. The majority of personal loans, including OneMain personal loans, come with a fixed interest rate and set payment amounts, which can be helpful for budgeting. As long as you make payments on time, your monthly payment amount will stay the same over the term of the loan.

6. Prequalify without lowering your credit score

With some lenders, you can see and compare personal loan offers without hurting your credit score. Prequalification lets you consider your options and budget before you apply for a loan by giving you an idea of the loan amount you might qualify for. Checking for prequalified offers includes a soft inquiry on your credit report, which won’t affect your credit score. If you see an offer that seems like the right fit, then you can submit an application.

Once you submit a new loan application, the lender typically performs what’s called a hard credit check on your credit report. Each hard credit check may have a small, temporary impact on your credit score.

7. Build credit while borrowing

If you manage a personal loan properly, it could help you build or rebuild your credit.

When you make your loan payments on time, you show lenders that you're a responsible borrower. Paying on time, every time, may boost your credit score by improving your payment history.

If you already have a credit card, a personal loan could also help diversify your credit mix, which could have a positive effect on your credit score. Your credit mix refers to the different types of credit accounts you may have, such as credit cards, personal loans and mortgages.

However, it’s important to note that missing or late loan payments can negatively affect your credit score. It’s essential to make your payments on time. Otherwise, the lender will report the late payments to one, two or all three credit bureaus.

A personal loan’s effect on your credit score depends on your overall credit history and habits, but if you make on-time payments, a personal loan could potentially help you build credit.

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Know the benefits before you borrow

Just like with any financial decision, borrowing responsibly is key. Make sure the loan aligns with your needs and that you're confident in your ability to make the payments.

Knowing the benefits and risks can help you make a more informed decision about whether a personal loan is right for you.