How To Get The Personal Loan You Really Need

April 12, 2019

Everybody needs a loan sometimes. It could be for taking a vacation, making a down payment on a car, attending a wedding in Hawaii or for any of a thousand other reasons.

Unlike a mortgage or a vehicle loan, personal loans are unsecured loans. With a mortgage, if the loan is not repaid, the house is foreclosed on and resold to settle the debt. With a vehicle loan, if the payments are not made on time, the vehicle is repossessed.

Personal loans, however, require no collateral, which means they are classified as unsecured loans. The borrower is able to obtain this kind of loan almost strictly through their financial reputation. Having a history of handling credit in a responsible way and a secure means of repayment are the most important aspects of this type of loan.

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 5 great tips before applying for one.

Go for the smallest loan amount you can

Any loan taken out is going to represent an additional payment that must be made each month. For instance, if a personal loan is obtained for the purpose of paying off credit cards, don’t use those cards until the loan is repaid. Nobody needs more debt than they can handle.

Make the internet your new best friend

Almost everything in the world is online. This includes a multitude of lenders offering unsecured personal loans. All loan providers are not equal. Some will offer low rates but have high loan origination fees.

Some will 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 beforehand.

Credit scores count

A credit score is a measure how good a person’s credit is. It is used as a way to measure trust. The higher the credit score, the lower the interest rate is on a personal loan. Conversely, the lower the credit score is, the higher will be the interest rate.

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.

Shop till you drop

Lenders are in the business of selling loans. This is their product and in order for them to make a profit in their business, they must let people borrow money. This means the borrower has the opportunity to compare lenders to see who is offering the best price.

It is well worth the small amount of time it takes to check the interest rates and terms of several different lenders before making a commitment to any loan company.

Pre-check before signing on the dotted line

Lenders will offer loans to anyone they can. That doesn’t mean a particular potential borrower is eligible for that loan. Before any commitment is made, check to make sure a loan is available that matches your income and employment terms.

There is no point in having a lender pull a credit check if you can’t qualify for a loan.

Getting a personal loan is a relatively simple process. The internet has made it easier, but it still boils down to a few basics. Applying these tips can make an enormous difference between no loan and getting exactly the loan that is right for you.