What’s the Best Way to Pay Off a Large Expense?

Spending within your budget is typically good life advice. Don’t pay for something you can’t afford, and if you’re borrowing money, make sure there’s a plan in place to avoid getting buried in mounting, high-interest debt. 

Whether it’s a wedding, a baby on the way, a dream vacation, a big home improvement project, or another costly expense, most Americans will require some type of financing arrangement in lieu of dispensable cash. Saving up through an emergency fund is one way to get ahead of an expense, but not everyone has the foresight. And for those who do, it may be wiser to save it for an actual emergency, like unexpected medical costs or a sudden loss of income. 

Of course, there is also the option to charge the expense on a credit card. For those who can afford to pay off their balance in a reasonable time frame, this might be the best option. However, for those who can’t and plan on carrying a month-to-month balance, using a card to cover a large expense can result in high, compounding interest charges until the balance is paid in full. 

So if you didn’t save up and prefer not to charge a card, what other options are there? For many American consumers, an online personal loan has become a go-to resource when purchasing certain big-ticket items. Here are a few reasons why a personal loan may work for you. 

Prior to the internet era (specifically the past 15 years), applying for a personal loan was an arduous process that involved bouncing from one local bank to another lending agency, while having to deal with strict lending criteria & policies, mountains of paperwork, and long waiting periods. Thanks to the emergence of peer-to-peer (p2P) online lending, however, the process has become way more seamless and can be conducted totally online, with no need to visit an in-person bank or lender. 

Another boon of online lending is the amount of funds you can become eligible for, based on creditworthiness and other factors. Using a tool like Fiona for example, consumers can get matched with loan amounts as high as $250,000. Typically, it will require a strong credit rating and history, as well as proof of income, to receive an amount on the higher end of the spectrum. However, applicants’ whose credit may not be quite up to par can potentially get approved for larger amounts by adding a co-signer. 

Once an applicant is approved for a loan and receives funds, they are then responsible for repaying the amount to their respective provider. The majority of online personal loans have fixed ARPs (accounting for the interest rate plus costs/fees), which means the monthly payment remains the same over the life of the loan. Beyond that, borrowers have the option to alter their monthly payment by choosing the length of the loan term (i.e., repayment period). 

Borrowers who choose a longer term (up to 84 months) can reduce their monthly payment, but will pay more in total interest. On the other hand, borrowers who choose a shorter term (as low as 24 months) will have a larger monthly payment, but will ultimately save on interest. Choosing a loan term all depends on your budget, and which option makes the most sense based on personal financial factors. 

As the above examples illustrate, choosing a personal loan to cover a large expense can be a great option for consumers who seek a transparent, fixed repayment plan they can work into their own financial timeline. Thanks to a streamlined process,  high maximum amounts, and flexible terms, Fiona users can get matched with a personalized loan option for their unique situation, while comparing offers from a marketplace of top providers.