Skip Navigation Documents in Portable Document Format (PDF) require Adobe Acrobat Reader 5.0 or higher to view,download Adobe® Acrobat Reader.
BTC Bank

Do’s and Don'ts of Using Personal Loans

When it’s time to buy a new car or move into a new home, most people turn to their local bank for an auto loan or mortgage. Did you know that your local lender is also here when you need to cover unexpected bills or other large purchases? Personal loan banks in Missouri provide funds for a wide variety of situations. Some reasons to get a loan for personal use include:

  • Paying unexpected medical expenses
  • Purchasing appliances and furniture
  • Covering moving expenses
  • Funding a wedding or funeral
  • Consolidating credit card debt
  • Making home improvements

What is a personal loan?

Personal loan is an umbrella term used to describe a loan made to an individual for a variety of unique reasons. Personal loans can be secured or unsecured. If secured, the borrower must provide an asset as collateral in case they fail to repay their loan. For many banks, a secured personal loan can be backed by the borrower’s vehicle or home. Some personal loans are unsecured meaning the borrower provides no collateral to back the loan.

How do I qualify for a personal loan?

If you’re wondering how to get a personal loan, the process is similar to applying for any other loan from the bank. Lenders will consider your credit score, debt to income ratio, and overall financial health. A secured personal loan will have lower qualification standards as the bank assumes less risk. An unsecured personal loan is likely to have higher qualification standards and charge a higher interest rate over the loan term.

The Do’s of Personal Loans

Personal loans can be useful tools in your financial portfolio. When large purchases or unexpected bills arise, most consumers turn to their credit cards. If you have good credit, a personal loan can offer a less costly alternative to pay for your expenses. Personal loans have a fast approval process, and personal loan rates in Missouri are typically lower than you would pay on your credit card. If you think a personal loan could work for you, consider these tips for using personal loans

DO Focus on Improving Your Credit Score - The interest rate and approval amount on your personal loan will depend on your credit score. A good credit score tells lenders they can trust your ability to repay the loan on time. This trust equates to lower interest rates, higher loan amounts, and fast approval when you need it.

DO Carefully Review the Terms of the Loan Agreement - Personal loans may seem like easy money, but don’t forget that you are entering into a binding contract. If you have any doubts that you can repay the loan according to the terms of your agreement, you should discuss it with your lender before you sign. Defaulting on your new personal loan will damage your credit for years to come.

DO Compare Interest Rates Between Lenders - Not all lenders are created equal. Your community bank may offer you a lower interest rate based on a solid banking relationship and knowledge of the local area. The interest rate you agree to will directly determine how much the loan costs you over time.

DO Use a Personal Loan to Consolidate Debt - If you fall behind on your credit card payments, a personal loan may be the best solution. The average credit card interest rate is 16.22 percent but yours may be higher. Paying off your credit cards with a personal loan can save you lots of money down the road. With a personal loan, you’ll attack your credit card debt with fixed monthly payments at a lower interest rate.

DO Be Aware of Additional Fees such as Origination Fees and Prepayment Penalties - This goes back to reviewing the terms of your loan agreement. Some loans may include a financial penalty for paying the loan off early. There are typically upfront fees associated with processing your new loan. These origination fees range from one to six percent of the loan amount. Luckily for our borrowers, BTC Bank prides ourselves on offering zero origination fees on our personal loans.

The Don’ts of Personal Loans

If you have good credit, getting a personal loan should be an easy process. As a borrower, be aware that misuse of the loan can cause long term damage to your credit score and financial stability. To avoid negative consequences of taking out a loan, consider these 5 “Don’ts” of personal loans.

DON’T Miss Loan Repayments - A personal loan is a fixed-term installment loan. Failure to make the regularly scheduled payments will hurt your credit score, cost you more money, and impede future financial transactions.

DON’T Use Personal Loans for College Tuition Expenses - If you need help paying for school, a personal loan is not the best option. Personal loans accrue interest and start repayment immediately -- while you’re still in school. If you need money for college, fill out a Free Application for Federal Student Aid (FAFSA) and explore federal subsidized and unsubsidized loan options.

DON’T Use Personal Loans for Non-Essential Expenses - While a personal loan may feel like easy money, you are assuming debt that will end up costing you more than you received. It’s better to save up for non-essential items than assume debt and pay interest for items you don’t need.

DON’T Apply for a Loan with Multiple Lenders - While you’ll want to compare interest rates between banks, shop around before applying for a loan. Interest rates will vary from bank to bank, and each bank can provide you with their average rate. Applying for a loan is a hard inquiry on your credit report and can lower your credit score. Applying for multiple loans will negatively affect your credit.

DON’T Borrow More than You Can Afford to Pay Back - Examine the details of your loan and know how much your monthly payments will cost. A bank may offer you more money than you need or can afford. A personal loan is only a good choice if you can afford the monthly payment for the life of the loan.

Get the Loan You Need Today

At BTC, we offer a variety of personal loans to meet the needs of our community members. Whether you need a personal loan, auto loan, home equity loan, or RV loan, we’ve got you covered. Contact a loan officer today to apply for a personal loan in Missouri. We’re here to serve you at 18 full-service banking locations in Bethany, Gallatin, Albany, Pattonsburg, Chillicothe, Carrollton, Boonville, Beaman, Trenton, Maysville, Osborn, Buffalo, Jamesport, Gilman City, Oregon, Cameron, or Lamoni, Iowa.  

Mortgage Lending icon


The right home loan will give you the go-ahead to make more memories.

Piggy Bank Icon


Saving for that special occasion, children's education, home improvement, or travel?