Hi! I’m in my late 20s and just started building my credit around 3 years ago. I financed my first car and always pay on time, plus I have one credit card that I manage carefully by not spending too much and always paying it back. I get anxious about debt since I’ve heard so many horror stories, but I’ve found myself needing to move quickly, and I don’t have enough saved up to cover the costs.
I was thinking of taking a personal loan from some of the offers on my Credit Karma app, but the APR and interest seem high (around 24% for a $3,000 loan with $1,200 in interest). My dad suggested a local lender, Tower Loans, but I’ve only heard bad things about them being predatory. Is it better to go with a local lender even if I have a bad feeling? Has anyone had experience with this company or can give advice on spotting predatory lenders? Any help would be appreciated!
@Evans I need to move because my lease renewal didn’t go as planned. I found out my partner didn’t sign their part of the renewal, and we got charged the higher month-to-month price. I found a house nearby with more space for less money, so I figured it would be smart to move. I tried to get a loan from my bank, but they denied me because I don’t have much credit history. So, any loan I get will probably have a high APR. I also want something without early payoff penalties because my goal is to pay it off fast.
@Lucypiper Getting denied might be a sign. This seems like a bad reason to take out a loan. You’ll end up paying more in interest than what you’ll save on rent. Either stick with your apartment or break the lease and pay the fee.
@Lucypiper This doesn’t sound like an emergency. It seems more like you’re living paycheck to paycheck and don’t have a budget. Maybe the car is too expensive?
Don’t focus so much on your credit score. The score is just a reflection of your financial health. If you’re financing a car you can’t afford and thinking of taking on high-interest loans, it might catch up with you soon. Focus on saving more, reducing expenses, and building an emergency fund instead of worrying about your credit.
@Russel1 I get what you’re saying, but I never said this was an emergency, just something I’m considering. I’m also driving a pretty modest car—a 2013 Hyundai sedan. I put down $3,000 and financed $8,000. I’m about halfway through the payments now. I don’t have a lot of debt, and I’m just weighing my options. I know I focus on my credit a bit too much, but I didn’t have much financial guidance growing up. Just glad I don’t have credit card debt! That’s why I’m here, trying to avoid bad decisions.
@Lucypiper If you don’t have enough saved up to cover an extra month of rent, you’re definitely on the path to credit card debt. Any unexpected cost, and you’ll be stuck taking out loans at 24%. Think about that. What if your car breaks down? What if something happens, like a medical emergency, job loss, or any unexpected event? Life throws curveballs all the time. This is a wake-up call to get serious about budgeting and saving.
24% is super high, probably because your credit history is short. I’ve used Sofi, Best Egg, UpStart, and Lending Club for personal loans over the years, and they’ve all been decent. You can shop around and see offers without affecting your credit.
But remember, many personal loan companies charge a fee upfront (2.5%–6% of the loan). For example, if you get a $3,000 loan, you might only receive $2,850 after fees.
Does your bank offer personal loans? Maybe your dad can co-sign to help lower the rate?
If you go for it, just be sure you can realistically pay it off quickly.
If you can, avoid taking the loan. If you absolutely need it, go to a local credit union or bank. You can get way lower than 24%. I got a loan years ago for about 6% from a credit union.
Payment 1 worked for me! They were easy to deal with and offered low rates. I got a $1,000 loan with $200 in fees, and my payments were $50 every two weeks.