How a personal loan for pet medical care works
A personal loan is money you borrow from a lender and repay with interest, typically in monthly installments. In this case, the funds would be used to pay for your pet's medical care. There are two types of personal loans -- unsecured and secured.
An unsecured personal loan doesn't require collateral, while a secured loan requires you to put something of value up. Although a secured loan may land you a lower interest rate, you risk losing your collateral if you miss payments.
Pros and cons of personal loans
If you're considering a personal loan to pay your pet's medical costs, it's wise to consider the pros and cons.
Pros
- You can get a personal loan from $1,000 up to $100,000.
- With some lenders, you can receive money the same day you're approved.
- With set monthly payments, you'll pay it off in a set timeline.
- Personal loans generally have lower interest rates than credit cards.
Cons
- You'll pay interest on the loan, and if your credit score is low, your interest rate may be high.
- You'll need to add a new monthly payment to your household budget, which may put you in an uncomfortable financial position.
The best time to consider the details of a personal loan is before signing on the dotted line. The goal is to ensure you land on the payment method that works best for you.
Getting a low-interest pet medical care loan
As with any loan, you want to qualify for the lowest possible interest rate. Here are the factors lenders consider when deciding your rate.
Your credit score
Generally, the higher your credit score, the lower your interest rate. If you check your score and find that it's low, you may want to ask a friend or family member to sign on as a cosigner. When someone with a high credit score agrees to cosign, the lender considers their creditworthiness as it determines the interest rate.
If you miss payments or default on the loan, the cosigner is on the hook to take over, so consider whether you can keep up with payments before bringing someone else into the situation.
Employment and income
Lenders ask for proof of employment status and how much money you earn to determine whether you can afford the monthly payments. The more secure your financial situation appears, the lower the interest rate you're likely to pay.
Secured or unsecured
You will typically be offered a lower interest rate if you take out a secured loan. That's because the lender knows it can repossess the asset if you miss payments, sell it, and recoup its losses. It's up to you to decide if a lower rate is worth risking a valuable asset.
Your repayment timeline
Lenders consider longer-term loans risky because there's more time for things to go wrong with your finances. To offset the additional risk, they frequently charge those with longer-term loans a higher interest rate. One workaround is to take out the shortest-term loan you can afford.
How to apply for a pet medical care loan
If you decide that a personal loan is the best way to pay for your pet's medical care, here's how it's done.
1. Check your credit score
High credit scores reap the rewards of lower interest rates and loan fees. Check your credit score, and if your score is low, consider alternative ways to pay for veterinary care. In the meantime, take steps to boost your credit score so you'll be ready to apply for a low-interest loan the next time the need arises.
2. Decide how much you want to borrow
Determine how much money you'll need to pay your pet's medical bills. Next, decide if you have cash to put toward the debt or plan to borrow the entire amount.
3. Rate shop
Check several lenders. And remember, interest rates only tell part of the story. Look at the annual percentage rate (APR). The APR includes interest, fees, and other charges, giving you a better idea of the total cost of the loan.
4. Decide on a lender
Once you've shopped lenders and know which offers the lowest APR and most attractive repayment terms, it's time to apply. If approved, carefully read over the loan agreement and ask questions if there's anything you need help understanding. Sign the loan agreement, wait for the loan proceeds, and plan to make your first payment approximately one month later.
