If you go to a credit union or bank's website and search for information about loans, you'll immediately notice that most types of loans are self-explanatory. You'll want an auto loan to buy a car, for instance, and mortgages are obviously used to buy houses. Some types of loans, though, are a bit harder to define.

One of these is the personal loan. Why would you want to get one of these, and why are they "personal"? Are you borrowing money directly from an employee or can you only get one of these loans if you have a deeply personal reason for doing so?

The reality is that a personal loan is one of the most versatile loans available. Once you've learned how a personal loan can be used, you might just want to get one yourself.

Just what is a personal loan?

Here's what a Personal Loan Is

While vehicle loans and mortgages have specific purposes, personal loans are general purpose loans. In other words, you can use them for almost anything, from home improvement projects to hobby gear.

Most personal loans are unsecured loans. In other words, you don’t need to put up some collateral in exchange for the loan, so you don’t need to worry about a credit union or bank repossessing or foreclosing on anything if you fall behind on your payments. However, this is a bigger risk for the financial institution making the loan, so personal loan rates are significantly higher than it is for secured loans such as home equity loans.

Apply for a personal loan at First Alliance Credit Union

How can you use a personal loan?

Since personal loans aren't meant for a specific purpose, the only limit on how they can be used is your imagination. People have come up with many smart ways to use a personal loan, such as:

Debt consolidation—if you have several debts, you can take out a personal loan to pay off everything you owe. You'll reduce the number of payments you make each month, and the odds are good you'll also get a lower interest rate.

Covering emergency costs—If you have a financial emergency that costs more than you have saved in your emergency fund, apply for a personal loan to cover the costs instead of charging the amount to a credit card with a high interest rate.

Home improvement projects—There's no getting around the fact that home improvement projects are expensive. While a home equity loan will have a lower interest rate, you will have to put up your home as collateral. A personal loan, though, will get you the money you need without you having to worry about losing your home if you lose your ability to pay back the loan.

You can also use a personal loan to:

• Fund education expenses
• Fund a wedding
• Pay for a vacation
• Cover moving costs
• Buy a used vehicle from a private owner

How can I Get a Personal Loan

If you’ve got some goals that a personal loan would help you reach, you might be wondering what you have to do to get one. Unfortunately, credit unions and banks don’t just give personal loans away. First, a lending advisor has to make sure you qualify.

Lending advisors take several factors into account when deciding if you qualify for a personal loan. A good credit score is one of the most important factors, since it not only increases your chances of qualifying for a loan but can also get you a lower interest rate in the process. Lending advisors will also take your employment status into account, as well as your income and how much debt you currently have. You’ll also need to show a lending advisor documents that confirm your identity, such as:

• Proof of income
• Valid government-issued ID
• Proof of residence
  
  

Got questions about personal loans? Ask us!

Reach Your Goals With a Personal Loan From First Alliance Credit Union

A personal loan is one of the most versatile loans available. You can use it for anything from paying for your wedding to consolidating credit card debt. However, it is an unsecured loan, so while you won’t have to put up any collateral, you will have a higher interest rate on any money you borrow.

If you’d like to see what a personal loan can do for you, talk with a First Alliance Credit Union lending advisor today. They’ll be happy to help you figure out if a personal loan is right for you. If it is, they’ll guide you through the application process and even show you how to make loan payments from your First Alliance checking account or savings account through our online banking platform, mobile app or Advisor Supported Kiosks!