Most people are familiar with using a loan to buy a car or a home. But personal borrowing, like an unsecured signature loan or preferred line of credit, can offer additional flexibility.
Life doesn’t always happen on schedule. Your car may need repairs before you’ve finished saving. Or you may be consolidating debt to simplify your finances. An unsecured signature loan or personal line of credit can help bridge the gap when an important expense doesn’t fit neatly into your budget. They can offer flexibility when life brings unexpected expenses.
Understanding how these borrowing options work can help you make informed decisions and manage your money with confidence. Here’s what you need to know.
Understanding your personal borrowing options
Sometimes you need to borrow a specific amount for a one time expense. Other times, you may prefer ongoing access to funds that you can use when needed. Understanding the difference can help you choose the borrowing option that best fits your goals.
Unsecured signature loans
Unsecured signature loans may make sense when you know exactly how much you need to borrow for expenses like debt consolidation, home repairs, wedding planning, or a major purchase.
- You receive your approved loan amount as a lump sum.
- You repay the loan through predictable monthly payments.
- Payments are typically fixed over a set repayment period.
- You don’t need to provide collateral with unsecured signature loans. This is different from an auto loan or a mortgage loan, where the car or the home is the collateral.
Personal lines of credit
A personal line of credit works well when expenses are ongoing or difficult to predict, such as home projects completed in stages or unexpected costs that arise over time.
- You’re approved for a borrowing limit that you can access as needed.
- You only borrow what you need, when you need it.
- You can access your line of credit for future expenses without submitting a new application.
- No collateral is required.
What can you use personal borrowing options for?
One of the biggest benefits of personal borrowing options is flexibility. While many loans are designed for one specific purpose, personal loans can often be used for a variety of expenses.
Here’s a quick look at common borrowing options and what each is best suited for.
If you’re borrowing to… | The best fit is probably… |
| Pay off a debt, fund home improvements or repairs, or handle emergency expenses | An unsecured signature loan or personal line of credit |
| Make a major purchase | An unsecured signature loan |
| Cover ongoing expenses | A personal line of credit |
| Buy a vehicle | An auto loan |
| Buy a home | A mortgage loan and/or down payment assistance program |
| Cover tuition | Student loans |
| Fund business expenses | Business loans |
Choosing the right loan can help you save money and better align your borrowing with your goals.
What are the requirements for personal borrowing?
Every lender has its own borrowing requirements, but many review similar factors during the application process.
Lenders may consider factors like:
- Your credit history and credit score.
- Your income and employment history.
- Your debt to income ratio.
- Whether the monthly payment fits comfortably within your budget.
Meeting these requirements doesn’t guarantee approval, but understanding what lenders look for can help you prepare before applying.
Comparing your personal borrowing options
Just like any major financial decision, it’s important to compare your options. It’s helpful to understand what loan terms may be available to you before completing a full application.
When comparing borrowing options, consider:
- Interest rates
- Monthly payments
- Loan terms
- Fees and other costs
- Whether the loan fits comfortably within your budget
- Whether a lump sum or ongoing access to funds best fits your needs
Shopping around can help you find the borrowing option that best aligns with your financial goals.
Which personal borrowing option is right for you?
Start by asking yourself this question: Do I need a specific amount all at once, or am I trying to cover ongoing expenses?
Your answer can help you choose whether to explore an unsecured signature loan (lump sum) or a personal line of credit (ongoing borrowing). Then follow up with these questions.
- Does the payment fit comfortably within my budget?
- Have I compared rates and terms?
- Have I explored my borrowing options?
If you answered yes to most of these, personal borrowing may be worth exploring.
Start building your financial toolbox
Personal borrowing can help you manage life’s expected and unexpected expenses while supporting your broader financial goals. Understanding when and how to borrow is an important part of building a strong financial foundation.
Whether you’re consolidating debt, planning for a major life event, or navigating an unexpected expense, the right loan can become another useful tool in your financial toolbox.
SECU members can take advantage of newly lowered rates on unsecured signature loans and personal lines of credit with predictable monthly payments. If you’d like to learn more, our experienced lending team is here to answer your questions and help you determine whether a personal loan is the right fit for your goals.
