There are so many reasons that can make you want to consider taking a personal loan. For instance, things such as debt consolidation, motor vehicle financing, holiday travel, home improvement, and student financing are some of the most common reasons. But without proper consideration of certain important aspects, the personal loan may stand lower chances of getting approved by your prospective lender, and in case it does get approved, there are certain aspects that may live to haunt your decision for a considerable amount of time. So what exactly can give you the sure-fire confidence to walk into your lender’s facility to borrow a personal loan. Here are 6 things you should know about taking out a personal loan.
- Learn about the Interest Rates
The best thing about personal loans is that most financial institutions offer lock-in interest rates and it also stays the same through the loan period. With personal loans, you are able to bargain for a lower interest rate, especially if you have a good credit score. Whatever you agree on at the time of your loan approval is what you’ll end up paying. Nonetheless, interest rates may vary from one lender to the other, so be keen on choosing where to borrow and consider weighing your options between a variable and a fixed interest rate personal loan go here to see most of this information.
- Personal Loans Are Unsecured
in most cases, personal loans do not require a collateral. All you need is a stable income and a good credit score to show for it. However, defaulting may have some serious repercussions on your credit score. If this happens, it may ruin your chances of ever getting another loan in the future. The fact that they are an unsecured loan is one of the major reasons you can apply for personal loans online these days.
- Your Credit Score Is Subject to Review
One of your best assets when applying for a personal loan will be your credit score. It is important to note that lenders can agree to sweeten or bitter the personal loan interest rates based on your credit score. For instance, a poor credit score may attract higher interest rates, which may be up to about 30% of the principle in some banks, credit societies, and lending institutions.
- Watch for Additional Fees
upon deciding to apply for a personal loan, it is paramount to assess all the fees involved in your repayment schedule. Such may include insurance policies, prepayment penalties, and late payment fees. Some of the things the lender will need to come clean about are Annual Percentage Rates (APR). APRs and interest rates are two different things. APR is the cost of borrowing the loan and the additional fees charged by the financial institution. As a wise personal loan borrower, be sure to check on the requirements and your APR before signing on the dotted lines.
- The Payment Plans
Before applying for a personal loan, it is paramount to seek one that will suit your income without running you dry. Income is an important factor to use in determining the amount of money you need to borrow and the duration it will take you to repay the loan.
It is always important to understand a particular bank or lending institution’s minimum requirements in terms of credit history, financial history, documentation, and type of entity. In most cases, these play a huge role in determining the amount of personal loan your qualify, the interest rates and your customized repayment plan.
In a nutshell, personal loans come in handy to sort out your “personal growth objectives that require immediate funding. Nonetheless, you’ll want to think about the interest rates, the requirements from the lender, your credit score, and the costs, including legal fees and insurance policies.