What to Know when Applying for a Personal Loan

By on November 9th, 2016

personal loan
Photo Credit: Pixabay.com

Personal loans are a controversial financial operation. Most of the potential borrowers are cautious about applying to this kind of financial help. It happens when people simply don’t consider all possible benefits and risks of the personal loans.

That’s why, unfortunately, some people really fall in the trap. How to avoid it and what you, actually, have to know about personal credits, this article reveals.

1. Consider Different Offers

Before applying to a usual financial agency, it’s better to conduct a research and consider other offers. Don’t be bound to one company. There are plenty profitable offers among online loan companies. Thus, it’s better to search for the best offer, which will meet YOUR expectations and opportunities.

Sometimes it’s really complicated to manage your budget in 30’s. So, personal loans are a reasonable solution as they have lots of requirements, which not every 18-year-old person will meet. Also, if you wonder how many personal loans can you have at once, try to consider your age too.

2. Check Your Credit Score

Knowing your credit score is crucial for knowing what interest rate you can get. If your credit score is low, it’s better to improve it and apply for the more reasonable rate. Three main agencies – Experian, Equifax, and TransUnion – provide information about the credit score.

3. Look through Reports

Checking out the report is important as 50% of people find out mistakes in them. It leads to higher interest rates. If you find out a mistake in the report, you have to wait for 30 until the agency will fix the errors.

4. Personal Loan Purpose and Opportunities

When applying for a personal loan, it’s important to consider personal loan purpose. Probably, you don’t even need a professional financial help. It especially refers to people, who still haven’t paid their credit card debts and installment loans pays!

Furthermore, it’s crucial to understand what you can afford. So, ask yourself first ‘Am I eligible for a personal loan?’ If your answer is ‘Yes’, then you definitely have all chances to get an approval on reasonable conditions. Otherwise, you should consider your creditworthiness and change something.

5. Choose Type of Interest Rate

The lender will definitely ask you what kind of interest rate you choose. You will have to choose between variable and fixed interest rate. The fix one is usually higher but stable. The variable is attractively lower but can change not in your favor.

6. Choose Type of Loan

You will also be asked to choose between secured and unsecured loans. If you can provide collateral, you should better choose secured loan. The interest rate is usually lower as the risk of the lender is justified. But if you aren’t sure you will manage to pay off the debt, it’s better to choose unsecured loan without collateral, which you can lose.

7. Consider Loan Repayment Insurance

Some lenders offer to apply for the loan repayment insurance. It will help to pay off the debt if the borrower doesn’t manage to do it. The attitude to the loan protection is controversial. The borrower is the only one, who should decide whether it’s a reasonable investment.

8. Ask for Repayment Penalties off

Just because your early payments are loss-making for the lenders, most of the offers contain repayment penalties. You should search for the offers without such pitfalls or ask a lender to remove them.

9. Find out Hidden Fees

Almost every offer contains hidden fees but most of the people are cautious and ask the lender about them beforehand. This way it’s possible to avoid them and don’t lose money!