For this post, we’ve teamed up with our partners at Fairstone
Getting a personal loan is a big decision. If you’re considering one, the first step to responsible borrowing is making sure that you can afford to pay back your loan. Here are 3 simple steps to help you decide if you can fit loan payments into your budget:
Step 1: Know Your Loan Type, Loan Amount And Loan Term
Before you can estimate your loan payments, you’ll need to determine what type of loan you’re looking for, how much money you want to borrow, and how long you want to take to pay off your loan. These decisions play a big role in how much your loan payments will be.
- Loan type – a secured personal loan is a good option for homeowners looking to borrow money at a lower interest rate. By using home equity to back your loan, your loan payments will likely be lower. For non-homeowners, your option will probably be an unsecured personal loan, which does come with a higher rate but offers more flexible repayment terms.
- Loan amount – how much money you’re able to borrow will depend on your loan type and your credit history. At Fairstone, you can borrow up to $50,000 with a secured personal loan and up to $25,000 with an unsecured personal loan.
- Length of borrowing (loan term) – if you choose to spread out loan payments over a longer period, your payment amount will decrease. Loan terms range depending on the lender and the type of loan you choose. At Fairstone, unsecured personal loans can be paid off any time within 60 months of borrowing, with no prepayment penalty. Secured personal loan terms range from 36-120 months.
Are you interested in learning more about the different loan types, loan amounts and payment terms? Learn more about your borrowing options with Fairstone here.
Step 2: Try A Loan Payment Calculator
Loan calculators give you an estimate of your monthly loan payment. When you use a calculator, you can find out how payment frequency, along with your loan type, loan amount and loan term, affect your payment amount. Looking for a good loan payment calculator? Visit Fairstone’s website.
Tip: Payment frequency is how often you want to repay your loan. The more frequent your loan payments, the lower each individual payment will be. For example, if you pay your loan monthly, your payments will be one set amount each month over the course of the loan term. If you pay semi-monthly, you will make two payments a month and the amount will be approximately half the monthly amount. If you pay your loan biweekly, the payment amount will be slightly less than the semi-monthly payment (since you will make 26 payments a year rather than 24). With Fairstone, you can choose whichever payment frequency works best for your budget.
Step 3: Get A Loan Quote
It’s important to note that there’s a difference between a loan payment calculator (which requires no personal information) and a loan quote. A loan quote is personalized to your unique borrowing needs and provides you with an accurate loan payment amount. At Fairstone, you can get a loan quote to find out what loan type(s) you’re eligible for, how much money you could qualify for, and what your payment might be – all by entering a few basic details. Completing a loan quote only requires a soft credit check (which doesn’t affect your credit score) and there’s no obligation to take out the loan.
If you’re wondering how much your loan payments might be, and whether you can afford to borrow money, you’ve already taken the first step to responsible borrowing. By ensuring you understand your loan choices, including loan amount, term, type and payment frequency, you’re becoming an informed borrower and can advocate for yourself when selecting a lender.