Loans

5 tips for paying unexpected expenses

Unplanned or emergency expenses can leave even the credit-savvy consumer searching for answers. With fast funding and potentially low rates, personal loans may be a good solution. Being organized, shopping around and embracing online technology are options for gaining fast approval for a personal loan.

Read on to find out how to secure a personal loan for unexpected expenses:

5 tips for paying unexpected expenses

1. Keep personal financial records organized and accessible

When funds are needed in a hurry, Liz Modesitt, regional manager for 13 retail locations of First Bank in the St. Louis area, says that the best thing consumers can do to expedite the borrowing process is to be prepared.

“Have current pay stubs, W-2s or tax returns if self-employed on hand for income verification,” Modesitt says. “If these documents are not available at the time consumers apply, it can cause unnecessary delays.”

What you need to know: Being prepared and keeping your financial records organized in an accessible location will make the process of applying for a personal loan easier.

2. Consider borrowing from a credit union

Generally, credit unions have lower interest rates for borrowing than commercial banks, says Modesitt. However, consumers should keep in mind that membership is required before any loan can be established.

“This can usually be satisfied by opening a checking or savings account with the credit unit,” she says. “Borrowers will want to consider whether the savings in interest outweighs the added requirements.”

What you need to know: Credit unions can be a great way to secure a personal loan with lower interest rates, especially if you’re already a member of a credit union.

3. Look into online lending platforms

Al Goldstein, CEO of Avant, an online lending platform where consumers can apply for personal loans, says that the new wave of online lending platforms is using advanced underwriting methods to accurately factor in risk.

Online lending platforms position themselves as best for consumers “who find themselves in an emergency situation,” Goldstein says. “Applications take minutes to complete and consumers can receive funds as soon as the next business day.”

What you need to know: Online lending platforms typically have fast application processes and are ideal for those who need a loan quickly.

4. Check your prequalification offers

Prequalifying for a personal loan allows you to know if you’ll get approved for the loan before officially applying, which can save you time, money and hard credit inquiries. It’s also the best way to determine which lender will offer you the best rates and terms.

While many online lenders do offer prequalification, not every lender does. If you’re applying for a personal loan and want to save a couple points on your credit score, compare offers using our prequalification form.

What you need to know: Prequalifying for a loan lets you know if you’ll get approved before you apply and is a great way to compare rates from multiple lenders.

5. Get a financial plan in place

While you can’t plan for every emergency, you can save up an emergency fund to ensure that you’ll have money in the bank if a larger expense does come your way.

But if you’re caught off guard by an unexpected expense and need to take out a loan, you can avoid future debt by creating a plan to pay off that loan. It’s always a good idea to consult with a trusted financial adviser to help you get a payment plan in place based on your financial situation. You can also access our loan calculator to determine the monthly payments on your loan.

What you need to know: Set aside dedicated emergency savings to prepare for unexpected expenses or establish a solid payoff plan by speaking with a financial adviser or using a loan calculator.

Next steps

If you need a personal loan quickly, it can be tempting to apply for the first loan you see or accept the first offer you get. However, it’s always best to shop around with multiple lenders to find the rates and terms that will allow you to pay back your personal loan without incurring more debt. Our rankings of the best personal loans is a great place to start.

Source: Bankrate

Joseph Tanner

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