You can save on interest by taking a personal loan instead of a credit card.

When applying for a personal loan to finance a home upgrade, consolidate debt, finance a vacation or pay for a move, you need to develop a comprehensive repayment strategy.

Personal loans can be complicated, so here's a list of questions to ask yourself before applying for a new loan.

How much do I need？

The first step in deciding on a personal loan is to figure out how much money you need to cover your expenses. Some lenders will give you a personal loan of as little as $500, but most lenders will give you at least $1,000 to $2,000. If you have less than $500, you might be better off saving first, or borrowing money from family or friends in an emergency.

Which is better for me: send it directly to my creditor or receive it from my bank account?

Usually, you deposit money into your bank account to get a personal loan. However, some lenders allow you to use a loan to consolidate your debts and send the funds directly to your creditors instead of depositing them in a bank account.

If you'd rather manage the money yourself or plan to use it for something other than paying down your current debt, you can opt for a bank transfer.

When do I have to start paying?

Loan repayments must begin within 30 days of the loan agreement. The repayment period is usually six months to seven years. The term of your loan affects your monthly repayments and interest rates.

How much interest do I need to pay?

Your interest rate is determined by a number of criteria, including your credit rating, loan term and loan amount. Interest rates range from 3.49% to 29.99% or higher. If you have good credit and choose the shortest payback period, you will usually get the lowest interest rate.

Federal Reserve statistics show that the average interest rate on a 24-month personal loan is 9.39%. This is usually lower than the usual credit card APR; as a result, many people take out loans to refinance themselves.

The APR is usually fixed; it remains the same for the life of the loan.

Can I make recurring monthly payments?

As a borrower, you can choose the repayment plan that best suits your financial situation. When you use autopay, lenders can offer you a 0.25% or 0.50% discount on your APR.

Some customers choose to make modest monthly payments that allow them to pay off their debts in months or years. However, some borrowers want to pay off their debt early, so they opt for the largest monthly instalment.

Interest rates are generally higher, monthly payments are modest, and payback periods are long. Even if your monthly payment is lower, you'll pay more in the long run than you would with a higher down payment.

Lenders are notorious for denying mortgages to customers with debt-to-income ratios above 43%. Personal lenders, on the other hand, tend to be more forgiving. Increasing your monthly payment is possible if you think you can afford it in the short term while also saving on interest.

With debt-to-income ratios above 40%, the risk of financial distress increases. As a short-term solution, you should only do this if you have a safety net like a savings account or a partner's salary.