Single moms and dads have many financial responsibilities to juggle and this can be hard if you have one salary to do it on. Taking out a personal loan can give you that desired boost to your finances. However, there are a few things that need to be considered to make a personal loan work for your circumstances to avoid getting into a debt trap. Here is a guide on how to take out a personal loan as a single parent.
What can single parents use a personal loan for?
A personal loan is a diverse loan that can serve various needs, but most importantly it can help borrowers cover their expenses adequately with lenders offering loans that go up to a maximum of $50,000. You can use a personal loan to:
- Consolidate debt
- Purchase a car
- Cover medical expenses
- Purchase furniture
- Help you relocate and more
However, the amount that single parents can have access to will be determined by their credit score and the loan criteria which differs from lender to lender.
What could prevent you from having your application rejected?
Meeting the loans lending criteria and having a good credit score can make your personal loan application process easier. The application process is no different for single parents than any other borrower. But here are a few things that can cause your application to be rejected:
- Having too many debts. If you already have a few outstanding debts and your salary is the only salary that is maintaining your household, it can be harder for lenders to approve your loan application.
- Working part-time. A single parent that works part time can be viewed as a risk to lenders as this means that you don’t have a steady source of income. Your chances decrease will further if you supplement your income with government benefits.
- Having unpaid debt from a co-signed agreement. Lenders assess whether you will be able to pay off a loan, and having unpaid debt can decrease your chances of getting one. This also means that if you were previously married and you co-signed a loan with your partner, or a friend or family member that has accrued debt you may not be able to get approved.
What features can I compare?
Your options may be limited as a single parent, but you still have the choice to compare your way to a loan that is suitable for your finances. Some of the main features to compare when taking out a personal loan is the interest rate. Having a good credit score can increase your chances of getting access to a low rate personal loan. Using a loan calculator can also be beneficial in knowing your monthly repayments.
The fees and charges that come with the loan are important to compare. Check to see if there you will be charged with a penalty fee for paying your loan off early. Check if the loan comes with restrictions on how much you can borrow and whether it offers flexible repayments to know if it is suitable for you.