How To Get The Personal Loan You Really Need
Everybody needs a loan sometimes. It could be for taking a vacation, consolidating high interest debt, repairing a car, or countless other reasons.
Unlike a mortgage or a vehicle loan, personal loans are typically unsecured loans. With a mortgage, if the loan is not repaid, the house could go into foreclosure and be resold to settle the debt. With a vehicle loan, if the payments are not made on time, the vehicle can be repossessed.
Personal loans, however, usually don’t require any collateral, which means they are unsecured loans. The borrower is able to obtain this kind of loan almost strictly through their financial history. Having a background of handling credit in a responsible way and having reliable income are the most important aspects for getting approved.
Personal loans are basically a promise to pay without the necessity for collateral. This means the paperwork to obtain the loan is not as arduous as with a secured loan, but it also means the interest rate will probably be higher.
There are a myriad of options for getting a personal loan, so check out these five tips before you apply.
Avoid borrowing more than you need
Any loan taken out is going to represent an additional payment that must be made each month. For instance, if you get a personal loan to pay off high-interest credit cards, don’t use those cards until the loan is repaid. Nobody needs more debt than they can handle.
Compare multiple loan offers
Almost everything in the world is online. This includes a multitude of lenders offering unsecured personal loans. However, all loan providers are not equal. Some may offer low rates but have high loan origination fees.
Alternatively, you may find some that offer once a month or twice a month payment plans. Some will require payments to be made automatically from a checking account.
None of these options are bad on their own, but it’s important to understand all the terms and conditions. It is well worth the small amount of time it takes to check the interest rates and terms of several different lenders so you can find the best option for you.
Credit scores count
A credit score is a measure of how well you’ve handled debt in the past. It is used as a way to measure trust that you’ll repay the loan. The higher the credit score, the lower the interest rate is on a personal loan. Conversely, the lower the credit score is, the higher the interest rate will be.
This means that if a person has a high credit score their payment will be less than a person who has a low credit score.
Pre-check before signing on the dotted line
Just because you qualify for a loan doesn’t mean it’s a good choice for you. Before signing a loan agreement, check to make sure the loan payments are manageable for your income.
Getting a personal loan is a relatively simple process, but it still requires careful consideration. Applying these tips can make an enormous difference between no loan and getting exactly the loan that is right for you.