While credit cards are convenient, they can be expensive. If you can't afford to pay off the balance in full, credit card annual percentage rates (APRs) can be well into the double-digits, causing interest to accrue rapidly.When you have a big expense coming up, a personal loan can be a useful alternative to credit cards. While cards come with a credit limit and how much you pay back depends on how much you spend, personal loans are taken out for a specific amount. And personal loans generally have lower APRs than credit cards, so they can be a better financing option for large purchases.Read on to learn how to apply for a personal loan and get the financing you need for a large purchase.Do I Need a Personal Loan?According to TransUnion, one of the three major credit bureaus, personal loans are increasingly popular. As of the second quarter of 2022, 21 million Americans had access to personal loans, up from just 18 million last year. On average, the amount of personal loan debt per borrower totaled about $10,000 .Personal loans are a type of loan issued by banks, credit unions, and online lenders. Unlike some other forms of debt, such as home equity loans, personal loans are usually unsecured, so you most likely won’t have to worry about risking your property as collateral when accessing one. Secure personal loans do exist, though, and collateral could help get you an approval or even a lower APR with some lenders.Personal loans are installment loans, meaning you pay back the loan with fixed monthly payments over its repayment term. In general, personal loans have repayment terms between two and five years, but some lenders offer longer-term options.Unlike student or auto loans, which can only be used for specific expenses, personal loans have fewer restrictions. They can be used for a variety of purposes, such as:Debt consolidation: If you have high-interest debt, such as credit card debt, a personal loan can be used to consolidate that debt into one monthly payment at a lower interest rate.Home renovations: A personal loan can be used for home improvement projects, such as updating your kitchen or bathroom.Medical procedures: When your insurance doesn’t cover a medical procedure, such as Lasik eye surgery, a personal loan can help you cover the cost.Weddings: If you’re getting married and have your heart set on a particular venue or vendor, a personal loan can help you finance your dream wedding.When Are Personal Loans Not a Good Idea?Although personal loans can be convenient, they’re not always the best financing option. Here are three instances when you should avoid taking out a personal loan:You’re struggling to make ends meet: If you’re already having trouble making ends meet, a personal loan is not going to solve your financial problems. In fact, it could make them worse. Unless you’re using a personal loan to consolidate higher interest debt, a new loan will add another monthly payment to your budget, and if you can’t afford the payments, you could end up defaulting on the loan, which will damage your credit score.You don’t have a handle on your spending: If you’re not sure how much debt you have and how much you’re spending, using a personal loan to consolidate your debt won’t fix the issue. Without addressing the issues that caused you to get into debt — such as addressing a shopping habit or cutting expenses — you could increase your overall debt.You’re making an unnecessary purchase: Using a personal loan for unnecessary expenses (such as an expensive wedding or European vacation) can be very risky. You could take on more debt than you can afford, and that expense will end up costing significantly more due to accrued interest.Before taking out a personal loan, it’s important to carefully consider your financial situation and needs. Only take out a loan when you're sure the payments can fit within your budget, and you have a plan to repay the debt. You should always make sure to shop around for the lowest cost options before taking out a personal loan.Do I Qualify for a Personal Loan?Personal loan requirements vary by lender, but in general, they’ll look at the following criteria:Your credit score: Your credit score is a number that represents your creditworthiness. The higher your score, the lower the risk you pose to lenders. Although there are many credit score models, the most commonly used is the FICO credit score. In general, you need good or excellent credit to get a personal loan, meaning a score of 670 to 850. However, there are some lenders that do work with borrowers with credit scores below that range.Your income: Lenders want to ensure you have a steady source of money coming in. This helps them know you’ll be able to make your loan payments on time.Your debt-to-income ratio (DTI): The DTI is a percentage that reflects how much of your monthly income goes toward debt. Lenders use this ratio to determine how much debt you can afford to take on.How to Compare Personal Loan RatesIf you decide to take out a personal loan, you should compare loan options from multiple lenders to get the best deal. Here are three factors you should consider when shopping for a personal loan:APR: The APR is the interest rate you’ll pay on your loan, plus any fees charged by the lender. The APR is the best way to compare loans because it reflects the true cost of borrowing. The average APR for a personal loan with a 24-month term was 8.73% as of May 2022, but loans for borrowers with less-than-stellar credit can have rates as high as 35%.Loan term: The loan term is the amount of time you have to repay your loan. Although a longer repayment term will give you a smaller monthly payment, it will also increase the amount of interest you pay over the life of the loan. Personal loans generally are repaid over two to five years, but some lenders offer longer loan terms for borrowers with excellent credit. You’ll also want to ensure that there is no prepayment penalty for paying the loan off early.Origination fee: An origination fee is a one-time fee charged by the lender for processing your loan. Depending on the lender, the fee can range from 0% to 10% of the loan amount. You should compare this fee when shopping for a personal loan to ensure you’re not paying more than necessary.Before taking out a loan, do your homework and shop around. You can use Purefy's rate comparison tool to compare rates from multiple personal loan lenders.How to Apply for a Personal LoanTo apply for a loan, follow these steps:Check your eligibility: Most lenders have an online tool that allows you to check eligibility for their loan products. You can see what loan options may be available with a soft credit check, which doesn't affect your score. You should also read the lender’s FAQs and ask them any questions you may have about their requirements and policies.Fill out an application: Next, fill out a loan application. Lenders will ask you for your name, address, Social Security number, employer information, income, and desired loan amount. The lender will also ask you to consent to a hard credit check to proceed with the loan application.Wait for a decision: Once you submit your personal loan application, the lender will review your information and decide if the application is approved. In some cases, you may be able to get a credit decision the same day.Review loan terms: If you're approved for a personal loan, the lender will present you with loan terms. Be sure to review the interest rate, monthly payment amount, loan terms, fees, and total cost of the loan before agreeing to anything. If you agree to the loan terms, you'll be asked to sign a loan agreement.Select a loan disbursement method: Finally, you can decide how to receive the funds. Common disbursement methods include:Electronic transfer: Most lenders offer electronic transfers and will disburse the money to your checking or savings account.Creditor payment: If you are using a personal loan to consolidate debt, some lenders will pay your creditors directly. When you accept the loan, you can give the lender your account information for your debt, and they will use your loan to pay off those accounts.Check: If you prefer, you may be able to receive a physical check for the amount of the personal loan.Shopping for a Personal LoanWhether you want to upgrade your kitchen appliances, pay for your child's braces, or consolidate credit card debt, a personal loan may be able to help. But before you commit to a loan, it's important to carefully review the loan terms and ensure you know what interest rate and fees the lender charges.Rates and repayment options can vary by lender, so it's a good idea to shop around and compare loan options from multiple lenders. Rather than spending hours researching lenders on your own, you can use Purefy's rate comparison tool to compare personal loan rates from multiple lenders in minutes. Just enter some basic information about yourself, and you can get quotes from top lenders — all without affecting your credit score.