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Personal Loans

The Ultimate Guide to Personal Loans

Friday, May 22, 2020

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Written By

Janet Berry-Johnson Janet Berry-Johnson

Reviewed By

Dan Shepard

Personal loans are a versatile form of credit. You can use them to consolidate other high-interest debts, pay for home improvements and more. Because they usually come with fixed interest rates and repayment schedules, you know exactly how much you need to pay each month and when your debt will be paid in full.

Still, taking on any type of debt is a serious responsibility. This personal loan guide will help you learn more about how personal loans work, which pitfalls to avoid and some alternatives to consider.

In this guide, we’ll cover

Part I: Personal Loans 101

Part II: Common Uses for a Personal Loan

Part III: Personal Loan Traps and Scams to Avoid

Part IV: Alternatives to a Personal Loan

FAQ: Personal loans

Part I: Personal Loans 101

How do personal loans work?

When you apply for a personal loan, you borrow a specific amount of money — most often at a fixed interest rate — for a set amount of time. Then you pay off your balance monthly until it’s paid in full.

The terms of your personal loan will depend on your unique financial situation and your lender. The loans are typically offered in amounts ranging from $1,000 to $50,000, and potentially even higher, depending on the lender. As for the repayment period, the loans’ terms often range from one to five years, but can potentially go up to 15 years for purposes such as home improvement.

Personal loans are unsecured debt, meaning they’re not secured by an underlying investment like a home or a car. For that reason, they usually come with higher interest rates than you might get with a mortgage or auto loan.

To get a real sense of how much a personal loan will cost you, keep an eye on the annual percentage rate, or APR. It includes interest and other costs, which could include an origination fee. An origination fee is a loan processing fee that can typically be 1% to 8% of the loan amount; however, some lenders, such as Lightstream and Discover, don’t charge any origination fees at all.

Pros and cons of personal loans

Pros

  • Interest rates can be lower than credit cards. While interest rates on personal loan offers have risen lately, they can still be a good option for consolidating high-interest credit card debt, especially if your credit is top-notch. The average APR on a personal loan offer from a lender is now 11.81% for borrowers with excellent credit, and 15.61% for those with very good credit, according to recent data from parent site LendingTree; in contrast, companion site CompareCards lists the average APR on all credit accounts is 15.09%.
  • Quick access to funds. Depending on your lender, you may receive funding for a personal loan in just a day or two.
  • Predictable payments and interest. Because personal loans generally come with fixed rates and payment terms, you may not have to worry about your interest rate or monthly payment going up. That makes it easier to budget.

Cons

  • Could lead to overspending. Personal loans can be used for almost any purpose, which could lead you to borrow more than you can afford to repay each month.
  • Higher interest rates than some loan products. For example, if you have equity in your home and good credit, you may be able to get a better rate with a home equity loan or line of credit.
  • Damage to your credit if you don’t pay. Some lenders offer options for borrowers facing financial difficulties, and may work with you if you lose your job or face other financial troubles. However, your credit might be damaged if you ultimately can’t make your payments.

What you may need to qualify for a personal loan

  • Good or excellent credit. If your credit score is 640 or lower, it will likely be more difficult to get approval for a personal loan (although some personal loan companies might still work with you). By contrast, having good credit (a FICO score of at least 670) will give you more borrowing options, and a score of 740 will let you qualify for loans with the best interest rates and terms.
  • Low debt-to-income ratio. Lenders might be hesitant to lend money if your debt-to-income ratio is too high. This ratio is determined by taking your total monthly recurring debt and dividing it by your gross monthly income. For personal loans, lenders usually like to see a DTI ratio of 36% or less. Still, even with a high DTI, you may qualify for a personal loan if your credit score meets a lender’s criteria, and you have both a solid income and credit repayment history.
  • Cosigner or collateral. If you have a bad credit score, you may need a cosigner with good credit or collateral to help you qualify for a personal loan.

How to pick the best personal loan

Here are tips that can help you identify a personal loan that’s right for you:

  • Shop around with different lenders. Gather information on personal loans to compare interest rates and loan terms from various lenders.
  • Read the fine print. Make sure you understand your contract, your monthly payment and all terms and potential fees.
  • Read reviews. Reading reviews of top personal loan companies can help you gauge the quality of each lender and what your experience might be like.

Part II: Common Uses for a Personal Loan

You might be surprised to know just how many uses personal loans can have. According to an April 2020 report from LendingTree, some of the top reasons applicants seek personal loans include:

  • Credit card refinance: 32.0%
  • Debt consolidation: 31.0%
  • Home improvement: 8.5%
  • Major purchases: 5.0%
  • Car financing: 4.3%
  • Business: 1.8%

These numbers don’t mean personal loans are the right choice in every borrowing situation. Here’s some more information about potential uses, along with some pros and cons:

Common uses for personal loans

Debt consolidation

If you’re struggling to pay back several types of debt, a personal loan may let you streamline payments and pay less interest overall. One caveat: if you can qualify for one, a 0% balance transfer credit card could be a less expensive option for combining debt.

Credit card refinance

Personal loans often have lower interest rates than credit cards — just make sure you’ll actually save money after taking into account a loan’s interest rate, origination fee and repayment term.

Home improvement

If you don’t have enough equity in your home to qualify for a home equity loan or line of credit, a personal loan can help finance home improvements. It may, however, come with a higher interest rate.

Major purchase

A personal loan might cost less in interest than a credit card for that big buy of yours. Still, before taking on new debt, consider whether you really need that purchase now — or whether it would be cheaper to save up and pay cash.

Car financing

A personal loan could be an option for buying a car, but it might be easier to qualify for an auto loan, as well as pay less interest and fewer fees (a car loan uses the vehicle as collateral).

Small business financing

If you’re starting a business and aren’t yet earning money, it may be tough to qualify for a business loan. A personal loan can help get your business off the ground. One potential red flag: If your business goes under, you’ll still have to pay back the loan or risk damaging your credit.

Medical expenses

Taking out a personal loan to pay for medical expenses can keep medical bills from going to a collection agency. However, first see if your medical provider provides payment help, as many do. They may be willing to work with you to pay off your balance — and not charge interest.

Part III: Personal Loan Traps and Scams to Avoid

Here are some personal loan traps you should consider:

Advance loan fees

Occasionally, a fraudulent loan company will offer outrageous loans and loan terms with a catch: You must pay upfront fees or “insurance” to qualify.

Look out for lenders who ask you to wire funds via Western Union or MoneyGram — reputable lenders won’t ask you to pay money upfront.

‘No credit check’ loans

According to the Federal Trade Commission (FTC), a lender who isn’t interested in checking your credit is a red flag.

Steer clear of ads and websites that promise “Bad credit? No problem” or “We don’t care about your past,” the FTC cautions. These slogans usually signal a scam.

Precomputed interest

Some personal loans might come with precomputed interest, which means they use the original payment schedule to calculate interest, even if you make payments early. This forces you to pay more interest over time, even if you make larger payments or try to pay off your loan early.

Prepayment penalties

Some personal loans tack on a prepayment penalty if you pay your loan off early. And while prepayment penalties aren’t that common, they are unnecessary. Be sure to read through your loan terms to check for a prepayment penalty before you sign the agreement. If you find one, consider opting for another lender.

Part IV: Alternatives to a Personal Loan

Personal loans vs. credit cards

Credit cards can be a great deal if you pay them off monthly, as you have the potential to earn rewards.

Personal loans vs. HELOCs

A home equity line of credit (HELOC) is a revolving line of credit secured by your home. HELOCs often have lower interest rates than personal loans, and you may be able to deduct the interest if you itemize your taxes. By contrast, interest paid on your personal loan is not tax-deductible.

Personal loans vs. cash-out refinance

A cash-out refinance lets you take out a new mortgage that’s more than what you now owe, and pocket a portion of the loan as cash. It usually comes with a lower interest rate than a personal loan, but with longer terms, so you could end up paying more overall. If you’re opting for a cash-out refinance, check this calculator to determine how much you might be able to borrow, and what your new monthly mortgage payment will be.

Unsecured personal loans vs. secured personal loans

A secured personal loan requires borrowers to use an asset, like a vehicle or certificate of deposit (CD), as collateral. A lender can repossess the asset if the borrower fails to make payments, so interest rates on secured personal loans tend to be lower than those on unsecured loans.

FAQ: Personal loans

The amount you can borrow varies by lender, but generally ranges from $1,000 to $50,000.

Yes, if you use it to consolidate high-interest debts from credit cards or other loans. To get out of debt faster, make sure your new personal loan comes with a lower interest rate than you’re already paying, along with few or no fees.

Your interest rate depends on the type of loan you apply for, how much you want to borrow and the quality of your credit. While each lender is different — for example, some will work with you if your credit isn’t ideal — a FICO score of at least 670 will give you more options.

If you were denied a personal loan due to poor credit, the best thing you can do is work on improving your credit rating. Pay bills on time, pay off debt to reduce the amount of available credit you’re using and avoid opening or closing too many accounts.

Thanks to the internet, you can apply for a personal loan online and from the comfort of your home. You can also compare fees and interest rates from top personal loan companies by visiting this page.

If you apply for a personal loan, a hard inquiry will be placed on your credit report, but any negative hit your score takes will be short-lived. Your credit score will more likely take a larger hit if you borrow too much and can’t repay. On the other hand, repaying your personal loan on time, and ultimately in full, might actually help your score in the long run.

If you’re cash-strapped, this may sound tempting, but most mortgage lenders discourage it. Before approving you for a mortgage, lenders will look at your debt-to-income ratio, so taking on a personal loan to afford a down payment might actually disqualify you in the end.

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Reviews

BancorpSouth Review: Checking, Savings, CD, Money Market and IRA Accounts

Friday, May 1, 2020

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Written By

Janet Berry-Johnson Janet Berry-Johnson

In this review, we will cover:

BancorpSouth’s checking account options

BancorpSouth’s savings account options

BancorpSouth’s CD rates

BancorpSouth’s money market account options

BancorpSouth’s IRA account options

BancorpSouth’s checking account options

BancorpSouth My Way Checking

This entry-level checking account does not earn interest.
  • Minimum opening deposit: $50
  • Monthly account maintenance fee: $5 (waived if you meet specific requirements, detailed below)
  • ATM fee: No fee for using BancorpSouth ATMs. If you use an out-of-network ATM in the United States, you may be charged a fee by both BancorpSouth and the ATM’s owner. Call the bank to ask about current costs associated with out-of-network ATMs. If you use a foreign ATM, you’ll pay $2 per transaction, plus a 2% cross border fee.
  • ATM fee refund: None
  • Overdraft fee: $36 per item

This checking doesn’t earn interest, but it’s relatively easy to avoid monthly fees. You can avoid the above-referenced service charge by meeting one these requirements during the statement cycle:

  • $100 minimum daily balance, or
  • Five debit card purchase transactions, or
  • At least one direct deposit of $100 or more

The My Way Checking account also comes with access to BudgetWi$e, the bank’s free online budgeting tool.

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BancorpSouth Performance Checking

This account lets you earn higher interest rates if you have a relationship with the bank.
APYMinimum Balance to Earn APY
0.10%$30,000+
1.51%$0.01 - $30,000
  • Minimum opening deposit: $50
  • Monthly account maintenance fee: $10 (waived if you meet certain requirements, detailed below)
  • ATM fee: No fee for using BancorpSouth ATMs. If you use an out-of-network ATM in the United States, you may be charged a fee by both BancorpSouth and the ATM’s owner. Call the bank to ask about current fees associated with out-of-network ATMs. If you use a foreign ATM, you’ll pay $2 per transaction, plus a 2% cross-border fee.
  • ATM fee refund: The bank will refund their $2 ATM fee plus up to $2 in fees paid by the ATM owner for the first five non-BancorpSouth transactions if the account holder meets all three of the higher rate requirements listed below.
  • Overdraft fee: $36 per item

The standard interest rate for this checking account is pretty meager, but it may be easy for you to earn the bonus rate. The Bonus APY of 1.51% applies on balances of $30,000 or less if you meet these three requirements each statement period:

  • Must have at least one direct credit or debit, such as direct deposit or automatic bill payment
  • Must make at least 12 debit card purchase transactions
  • Must be enrolled to receive online statements

You’ll definitely want to make sure you meet the requirements to receive the bonus rate every month. Doing so will not only get you a higher APY, but you’ll also be able to avoid the $10 monthly service charge and get up to $10 in ATM fees refunded each month. You can also avoid the monthly service charge by maintaining a $1,000 minimum daily balance in your account.

The Performance Checking account also comes with access to BudgetWi$e, BancorpSouth’s free online budgeting tool.

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BancorpSouth Interest Plus Checking

This account lets you earn higher interest rates as you deposit more money in your account.
APY
Minimum Balance to Earn APY
0.05%$0.01 - $4,999.99
0.05%$5,000 - $9,999.99
0.05%$10,000 - $24,999.99
0.05%$25,000 - $49,999.99
0.10%$50,000 - $99,999.99
0.15%$100,000+
  • Minimum opening deposit: $1,000
  • Monthly account maintenance fee: $10 (waived if you maintain a $1,000 minimum daily balance)
  • ATM fee: No fee for using BancorpSouth ATMs. If you use an out-of-network ATM in the United States, you may be charged a fee by both BancorpSouth and the ATM’s owner. Call BancorpSouth to ask about current fees associated with out-of-network ATMs. If you use a foreign ATM, you’ll pay $2 per transaction, plus a 2% cross-border fee.
  • ATM fee refund: None
  • Overdraft fee: $36 per item

The interest rates available for this checking account aren’t exactly generous. The highest rates available on this account are quite a bit lower than the bonus rate available through the Performing Checking account. However, since the bonus rate is available only on balances up to $30,000, this account might be a better option if you maintain a higher balance in your checking account.

And there’s one more benefit that might be appealing to people who prefer paper statements with imaged checks. This service is free for Interest Plus Checking account holders, whereas some of BancorpSouth’s other checking account options charge a fee.

The Interest Plus Checking account also comes with access to BudgetWi$e, BancorpSouth’s free online budgeting tool.

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BancorpSouth Heritage Checking

This account gives seniors age 62 and older the ability to earn travel and bonus rewards.
APYMinimum Balance to Earn APY
0.10%$0.01
  • Minimum opening deposit: $50
  • Monthly account maintenance fee: $8 (waived if you maintain a $500 minimum daily balance)
  • ATM fee: No fee for using BancorpSouth ATMs. If you use an out-of-network ATM in the United States, you may be charged a fee by both BancorpSouth and the ATM’s owner. Call BancorpSouth to ask about current fees associated with out-of-network ATMs. If you use a foreign ATM, you’ll pay $2 per transaction, plus a 2% cross-border fee.
  • ATM fee refund: None
  • Overdraft fee: $36 per item

The interest rates available for this checking account are modest, but it offers some unique perks. Account holders receive:

  • One free box of checks per year
  • $100,000 common carrier Accidental Death and Dismemberment Insurance
  • A free Savers Club Book with discount offers at over 3,000 participating lodging properties, theme parks and car rental companies
  • The ability to receive discounts and earn cash rewards when they arrange travel through a third-party partner
  • Free copies of Sojourns magazine

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BancorpSouth Student Checking

This account doesn’t earn interest, but it makes free checking available to students age 24 and under with no minimum balance requirements.
  • Minimum opening deposit: $50
  • Monthly account maintenance fee: $0
  • ATM fee: No fee for using BancorpSouth ATMs. If you use an out-of-network ATM in the United States, you may be charged a fee by both BancorpSouth and the ATM’s owner. Call BancorpSouth to ask about current fees associated with out-of-network ATMs. If you use a foreign ATM, you’ll pay $2 per transaction, plus a 2% cross-border fee.
  • ATM fee refund: None
  • Overdraft fee: $36 per item

This checking account doesn’t earn interest, but with no minimum monthly balance requirements and no monthly maintenance fee, it’s an affordable option for college students. Plus, it comes with a few nice features. Account holders receive their first box of 25 checks printed at no charge and have the option to upgrade to checks with their college’s logo.

The Student Checking account is available for students through the age of 24. After age 24, the account will automatically be converted to another standard checking account.

The Student Checking account also comes with access to BudgetWi$e, BancorpSouth’s free online budgeting tool.

How to get BancorpSouth’s checking accounts

You’ll need to provide some basic personal information, such as your name, Social Security number, date of birth, address and driver’s license number. You’ll also need details for your current U.S. checking or savings account to fund your new account. If you don’t already have a U.S. checking or savings account, you’ll have to apply in person at a BancorpSouth location.

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How BancorpSouth’s checking accounts compare

This bank’s checking accounts offer modest interest rates compared with the best online checking accounts out there. Truly fee-free checking is only available to students, although it’s possible to avoid monthly service fees rather easily.

If you’re between the ages of 24 and 62 and don’t mind jumping through a few hoops to meet the requirements each month, you’ll earn a better rate with BancorpSouth’s Performance Checking than you will with their other accounts. However, you might be able to earn more by keeping less money in your checking and more in another interest-bearing account.

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BancorpSouth’s savings account options

BancorpSouth My Goal Savings

A good beginner account focused on saving toward a goal.
APYMinimum Balance to Earn APY
0.10%$0.01
  • Minimum opening deposit: $100
  • Minimum balance to earn APY: $0.01
  • Monthly account maintenance fee: $5 (waived if you maintain a minimum balance of $100)
  • ATM fee: No fee for using BancorpSouth ATMs. If you use an out-of-network ATM in the United States, you may be charged a fee by both BancorpSouth and the ATM’s owner. Call BancorpSouth to ask about current fees associated with out-of-network ATMs. If you use a foreign ATM, you’ll pay $2 per transaction, plus a 2% cross-border fee.
  • ATM fee refund: None
  • Overdraft fee: $36 per item

This is BancorpSouth’s basic savings account, and an option if you’re looking for a simple, no-frills place to store your cash. This account does have a monthly fee, but you can easily avoid it by keeping a minimum of $100 in your account.

Per Regulation D, you’re allowed up to six certain withdrawals or transfers per month. After that, there’s a $5 fee for each transaction from the bank.

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BancorpSouth Performance Savings

Earn a higher rate of interest by making a minimum monthly deposit.

Account holders can earn a higher interest rate on balances of $100,000 or less by making a minimum of $50 in total deposits into the account through either online banking transfer or ACH deposit. If you don’t make the minimum deposit, your account will earn the standard rate of interest. Call BancorpSouth to learn about the current rates.

  • Minimum opening deposit: $50
  • Minimum balance to earn APY: $0.01
  • Monthly account maintenance fee: $2.50 (waived if you maintain a minimum balance of $50)
  • ATM fee: No fee for using BancorpSouth ATMs. If you use an out-of-network ATM in the United States, you may be charged a fee by both BancorpSouth and the ATM’s owner. Call BancorpSouth to ask about current fees associated with out-of-network ATMs. If you use a foreign ATM, you’ll pay $2 per transaction, plus a 2% cross-border fee.
  • ATM fee refund: None
  • Overdraft fee: $36 per item

This savings account is an option if you plan to save at least $50 per month and can take advantage of the bonus interest rate. Even if you skip a month, the service fee is half that of the My Goal Savings account.

Again, watch out if you plan to make a lot of withdrawals each month. You’re allowed up to six certain withdrawals or transfers each month, per Federal Regulation D. After that, there’s a $5 fee for each transaction from the bank.

You cannot open a Performance Checking account online. Use BancorpSouth’s Find a Branch tool to locate a branch near you and sign up in person.

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BancorpSouth Select Savings

This account has a higher minimum balance requirement to open an account and avoid fees, but it also earns a higher interest rate.
APYMinimum Balance to Earn APY
0.20%$0.01
  • Minimum opening deposit: $1,000
  • Minimum balance to earn APY: $0.01
  • Quarterly account maintenance fee: $15 (waived if you maintain a minimum balance of $1,000)
  • ATM fee: No fee for using BancorpSouth ATMs. If you use an out-of-network ATM in the United States, you may be charged a fee by both BancorpSouth and the ATM’s owner. Call BancorpSouth to ask about current fees associated with out-of-network ATMs. If you use a foreign ATM, you’ll pay $2 per transaction, plus a 2% cross-border fee.
  • ATM fee refund: None
  • Overdraft fee: $36 per item

For people with a little more money available to open an account, the Select Savings account pays a higher rate of interest than you’ll get from BancorpSouth’s My Goal Savings account. This account does have a quarterly maintenance fee, but you can avoid it by keeping a minimum of $1,000 in the account.

Per Regulation D, you’re allowed up to six certain withdrawals or transfers each month. After that, there’s a $5 fee for each transaction from the bank.

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BancorpSouth Young Savers Savings

A low-fee alternative for teaching your children how to save.

Call BancorpSouth to learn about the current rates.

  • Minimum opening deposit: $25
  • Minimum balance to earn APY: $0.01
  • Monthly account maintenance fee: $0
  • ATM fee: No fee for using BancorpSouth ATMs. If you use an out-of-network ATM in the United States, you may be charged a fee by both BancorpSouth and the ATM’s owner. Call BancorpSouth to ask about current fees associated with out-of-network ATMs. If you use a foreign ATM, you’ll pay $2 per transaction, plus a 2% cross-border fee.
  • ATM fee refund: None
  • Overdraft fee: $36 per item

This account is only available to account holders below 17 years of age and requires a parent or guardian over 18 to be a joint account holder. Once the account holder reaches age 18, the account will convert to a My Goal Savings account.It’s a good account for teaching kids the value of savings because the minimum opening deposit is low, there’s no minimum balance requirement and no monthly service charge.

You’re allowed up to six certain withdrawals or transfer each month, per Regulation D. After that, there’s a $5 fee for each transaction imposed by the bank.

You cannot open a Young Savers Checking account online. Use BancorpSouth’s Find a Branch tool to locate a branch near you and sign up in person.

How to get a Bancop South savings account

You’ll need to provide some basic personal information, such as your name, Social Security number, date of birth, address and driver’s license number. You’ll also need details for your current U.S. checking or savings account to fund your new account. If you don’t already have a U.S. checking or savings account, you’ll have to apply in person at a BancorpSouth location.

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How BancorpSouth’s savings accounts compare

These savings accounts make it easy to avoid monthly or quarterly account maintenance fees, but their interest rates aren’t really that competitive. You’ll earn a better return on your money by opening one of these top online savings accounts.

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BancorpSouth’s CD rates

BancorpSouth Certificate of Deposit

Earn a higher rate of return than a standard savings account.

Interest rates are determined at the time of purchase. Call BancorpSouth to discover current rates.

  • Minimum opening deposit: $1,000 – $5,000, depending on maturity
  • Minimum balance amount to earn APY: $1,000 – $5,000, depending on maturity
  • Early withdrawal penalty: Early withdrawal penalties apply. Call BancorpSouth to learn more.

If you want to earn a higher rate of interest and don’t mind tying up your money for anywhere from one to 60-plus months, consider a BancorpSouth CD. The longer the term, the higher the rate.

You can open a CD with BancorpSouth with as little as $1,000, so there’s a low barrier to entry.

You cannot open a BancorpSouth CD online. Use their Find a Branch tool to locate a branch near you and apply in person.

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How BancorpSouth’s CD rates compare

BancorpSouth doesn’t publish their CD rates online, so it’s impossible to know how they compare to the CDs that you can get elsewhere. However, we do like their low opening balance requirements and a variety of maturity terms.

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BancorpSouth’s money market account options

BancorpSouth Money Market Select

Earn tiered interest rates based on your account balance.
APYMinimum Balance to Earn APY
0.10%$0.01 - $9,999.99
0.10%$10,000 - $24,999.99
0.10%$25,000 - $49,999.99
0.15%$50,000 - $99,999.99
0.20%$100,000 - $149,999.99
0.25%$150,000 - $499,999.99
0.25%$500,000+
  • Minimum opening deposit: $1,000
  • Minimum balance to earn APY: $0.01
  • Monthly account maintenance fee: $10 (waived if you maintain a $10,000 minimum monthly ledger balance)
  • ATM fee: No fee for using the bank’s ATMs. If you use an out-of-network ATM in the United States, you may be charged a fee by both BancorpSouth and the ATM’s owner. Call the bank to ask about current fees associated with out-of-network ATMs. If you use a foreign ATM, you’ll pay $2 per transaction, plus a 2% cross-border fee.
  • ATM fee refund: None
  • Overdraft fee: $36 per item

You’ll only need $1,000 to open a Money Market Select account, but you’ll need 10 times that amount to avoid the monthly fee mentioned above. If you can clear that hurdle, this is a way to earn a little more interest than you’d get from some of the bank’s checking account options. You’ll have access to unlimited over-the-counter and ATM transaction, but more than six withdrawals during any given month will hit you with a $10 fee per withdrawal.Keep in mind, though, you must have a BancorpSouth checking account to open a Money Market Select account.

How to get BancorpSouth’s Money Market Select account

You’ll need to provide some basic personal information, such as your name, Social Security number, date of birth, address and driver’s license number. You’ll also need details for your current U.S. checking or savings account to fund your new account. If you don’t already have a U.S. checking or savings account, you’ll have to apply in person at a BancorpSouth location.

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How BancorpSouth’s money market accounts compare

This account has a low opening deposit requirement, but the interest rates are low, too. You could potentially earn a better rate of return with a money market account from an internet bank.

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BancorpSouth’s IRA account options

IRA

BancorpSouth’s IRA lets you save for retirement with flexible contribution options.

Call BancorpSouth the learn the current rates.

  • Minimum opening deposit: Call the bank to learn more
  • Minimum balance to earn APY: Call the bank to learn more
  • Monthly account maintenance fee: None

If you’re under age 70½, you can contribute to an IRA and take advantage of potential tax savings. BancorpSouth’s IRA does not charge a monthly service fee, however, if you need to withdraw funds early, those withdrawals may be taxed as earned income and incur an early withdrawal penalty.

You’ll have to call the bank to learn more about interest rates associated with this account and how to open the account.

SEE DETAILS Secured

on Bancorp South’s secure website

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How BancorpSouth’s IRA accounts compare

We don’t know how BancorpSouth’s IRA CDs compare because the bank chooses not to advertise its rates. You’ll have to call to find out. If you do, be sure to compare the rates they’re paying to our list of the top IRA CD rates.

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Overall review of BancorpSouth’s banking products

BancorpSouth does offer a wide variety of account options for checking and savings, and while many of their accounts to charge a monthly or quarterly service fee, they make it easy to avoid the fees by maintaining relatively low minimum balances, using your debit card, or using direct deposit.

But if you’re like most people, you probably want to put your money where it will earn the best interest rate. If that’s the case, BancorpSouth might not be the best option for you because their interest rates just aren’t competitive with those offered by other banks. With many of its rates not published online, the bank doesn’t make it easy for you to shop around.

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Personal Loans

Debt vs. Credit: Definitions, Examples and Tips

Monday, April 13, 2020

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Written By

Janet Berry-Johnson Janet Berry-Johnson

Credit is how much you can borrow, while debt is how much you owe. You’ll often find the two terms discussed together because they’re connected — using credit creates debt.

The better you are at managing debt, the more credit you’ll have access to in the future — that’s why it’s so important to understand the difference between debt versus credit.

In this guide, we’ll cover:

What is debt?

What is credit?

What is the relationship between credit and debt?

How to manage credit and debt responsibly

Debt vs. credit FAQ

What is debt?

Debt is owing money to someone or something. Typically, when you have debt, you’re paying interest to a creditor. That’s not always a bad thing, though, as debt can take many forms.

Debt examples

  • Candace has a $200,000 mortgage on her home and $10,000 in student loans. She also has an auto loan for $15,000. Candace has $225,000 in total debt.
  • Marco has $5,000 in credit card debt and a $3,000 personal loan. Marco has $8,000 in total debt.
  • Ty has a $10,000 auto loan, $2,000 in credit card debt and owes the local hospital $3,000 for an emergency room visit. He has $15,000 in total debt.

As you can see from the examples above, people can have several different types of debt. Some types of debt are considered “good debt” and some are considered “bad debt.” We’ll go into more detail about good and bad debt later.

What is credit?

Credit is the ability to borrow money with the understanding that you’ll pay the lender, merchant or service provider back later. If you don’t have enough cash to buy a home or a car, or to pay an unexpected bill, credit allows you to take on debt. In that way, credit is convenient. But credit can also get you into trouble if you take on more debt than you can afford to repay. It can also get you stuck in a cycle of debt if you rely too much on high-interest credit cards or payday loans.

Credit comes in two main forms: secured and unsecured:

  • Secured credit requires some sort of collateral to back the loan, such as your home or a car. If you default on the loan, the lender has the right to take your collateral. Because collateral lowers the lender’s risk, you may find secured credit is easier to qualify for and may come with better terms than with unsecured credit.
  • Unsecured credit isn’t attached to any collateral, so lenders will rely heavily on your credit health and finances to determine your eligibility.

Credit examples

  • Secured credit: Mortgages, auto loans, home equity loans, home equity lines of credit, secured credit cards, title loans
  • Unsecured credit: Credit cards, student loans, personal loans, medical debt

What is the relationship between debt and credit?

The relationship between debt and credit is unique because one cannot exist without the other. People with no history of using credit don’t have a credit report or a credit score, and that makes it difficult for them to get approved for a loan and take on debt. However, if you have a history of managing debt well, lenders are more confident that you will make payments on time, and more willing to extend credit.

How to manage debt and credit responsibly

When possible, avoid using a credit card or taking out a debt without having a clear plan for repayment, unless you know you’ll be able to repay the amount you owe.

Payment history is one of the most important factors in calculating your credit score — in particular, in FICO scores, it’s 35% of your score. Pay all bills on time to avoid late fees and having late payments reported to the credit rating agencies.

If you owe money on your credit card and can’t afford to pay the balance in full, try to pay more than the minimum amount. Paying only the minimum each month could end up costing you quite a bit when interest is factored in, and it could take years to pay off the balance. (Our credit card payoff calculator can help you figure out how long it will take to pay off your balance and the interest you’ll be charged.)

If you can’t pay more than the minimum, that’s OK. Paying the minimum at least will help build a healthy credit history.

Whether a payday loan or title loan, be mindful of the fees that are tacked on to your debt. The annual percentage rate, or APR, can be a good measure of your cost of borrowing.

Your debt to credit ratio is a measure of how much of your available revolving credit (usually credit card limits) you’re currently using. You can calculate this ratio by dividing your total credit card balances by all of your revolving credit limits. Debt to credit ratio is a significant factor for calculating your credit score — the lower your ratio, the less risky you appear to creditors.

When you apply for new credit, the lender checks your credit, which results in a hard inquiry on your credit report. Hard inquiries can lower your credit score — especially if you apply for or open several new accounts within a short time frame. This signals to credit rating agencies that you might be having financial troubles.

One exception to this rule is if you’re shopping for a car or a mortgage. Credit rating agencies expect you to shop around for the best rate, so they ignore multiple hard inquiries for the same type of loan made within a 14 to 45-day period, depending on the scoring method.

You’re entitled to a free credit report from each of the three major credit reporting agencies every 12 months. Request these reports from AnnualCreditReport.com and review them for errors. Mistakes on your credit report can impact your credit score, whether you get approved for a loan and how much you’ll have to pay to borrow money.

If you find any errors on your credit report, follow the credit reporting agency’s instructions for disputing the information.

Debt vs. credit FAQ

Lenders and service providers use credit scores to make decisions about whether or not to offer you credit, how much credit they’re willing to extend to you, the interest rate they’ll charge and whether they’ll require a down payment or deposit. Having a good credit score makes it easier to do things like buy a home or a car, rent an apartment, get approved for a cellphone and set up utilities without a deposit.

Your credit score is essentially a measure of how well you manage debt. If you make debt payments on time, keep your debt balances low and use a variety of kinds of debt responsibly, you’ll have a healthy credit score.

“Good debt” is used to pay for something that has long-term value, increases your net worth and/or helps you generate income. For example, you might need a mortgage to buy a home, and real estate tends to have long-term value. You might get a loan to start or expand a business, which may increase your net worth if the business is successful. You might take out student loans to get a college degree, which can improve your earning power over time.

“Bad debt” is used to pay for things that have no lasting value. Credit cards are usually considered bad debt, as people may use them to buy things like clothing, electronics, vacations and expensive meals.

Debt tends to carry a negative connotation since it involves owing money. But when used wisely, credit can be a convenient way to pay for many things you otherwise might not be able to afford — after all, few people can afford to pay cash for a home or car.

Before taking on new debt, think through your current finances and your ability to repay the debt in the future. Remember: the more debt you take on, the less available credit and cash you’ll have going forward.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

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