It is hard to imagine a person in a modern society who would not face financial problems. There are a lot of reasons for the emergence of debts: a wedding, buying a car, personal emergency costs and other. And here you are in a situation where your expenses are out of control and you urgently need money. What to do?
Personal loans are an ideal solution, which can be one of the ways to get the right amount of money in the shortest time and cover expenses. Due to simple requirements, most people can easily get a loan, especially people with bad credit. There is also an installment loan online, so you can safely get the necessary funds the next day without any problems. Since the bank transfer usually takes up to 24 hours, you can be sure that the money will be deposited to your bank account in the nearest future.
However, sometimes people get a personal loan when they really do not need it. In addition, it does not help their problem. There are things you should know about before signing a loan agreement. Let’s consider them.
Personal Loan Basics
A personal loan is similar to other loans and is the amount of money that must be paid within a certain period of time (1-5 years) at a fixed rate of interest (not always).
You need to know that there are two types of personal loans: unsecured and secured. What is their difference?
The first type of loans is not supported by assets – the creditor has no collateral. Because of this, unsecured personal loan rates are usually higher in order to compensate for the risk.
A secured loan is issued on bail: if you can not return your loan, then the lender has the right to claim your asset as a payment. Secured loans are more popular than unsecured and include mortgage loans. Secured credit is a good option to save money, but carries a high risk, so you should first make sure that you can pay.
Bonus tip: how to calculate annual interest rate on your own.
Personal Loan Rates
The personal loan interest rate is fixed for the term of the loan. To get the best personal loan rate (the lower one), you need to have a good credit history. But there are also variable interest rates, the lack of which is a fluctuation as interest rates change, making it hard to budget for your loan payments.
Personal loans have a fixed maturity, which is indicated in months: it can be 12 or 60. If the repayment period is longer, the monthly repayment of the loan decreases, but you pay more in percentage. Your interest rate can also be tied to your repayment period.
In addition to a personal loan (if your credit rating is good), you can claim a credit card and have zero percent for a year or even longer. However, if you have an excellent credit score, try to explore many different options before choosing a loan form for the application.
It is necessary to check additional fees that can be hidden. This may be fees for initiation (sometimes they reach 4.5% of the total amount).
What To Remember About
You should be careful when applying for many loans because each time the lender checks your credit score. The more places you apply, the worse your credit rating, which can make it difficult to get the best personal loan rates. Therefore, ask lenders about the possible rates on the loan before applying.
The lender also checks your credit history, your earnings and debts, and only after this making a decision to grant you a loan. Your credit history for sure affects the rates for the personal loan that you receive, and your ability to repay the loan. Here are effective ways to achieve affordable rate on personal loans.
Personal loan interest rates in the USA look on average as follows: if your loan is excellent – 10.94%, good – 14.56%, average -19.84%, bad – 28.64%.
So, personal loans can be a reliable way to cover your costs. But first, check your credit health to find out if you are entitled to the best rates, and also make sure that the terms of the deal at your local credit union or on peer-to-peer lending resources are worse than your bank’s.