What is the most common loan of choice?
There are many types of loan out there, and if you need to get your hands on some cash to help you get a house, buy a car, consolidate your debts, or so on, you need to know which is best for you.
One of the most popular loans that are taken out by people these days is the personal loan. These loans can be secured or unsecured, although most of the time they are unsecured loans. Personal loans can be used for anything from debt consolidation, getting work done on your house, or even for a vacation if you wanted.
Personal loans, such as CreditNinjas personal loans, are very popular, and although they do not do the same things a mortgage or an auto loan can do, they are always worth looking into when you are trying to choose a loan to help you financially.
There are so many personal loan types too, though, and this makes choosing the right loan even harder. You can narrow your choice down to personal loans, but then you need to choose what type of personal loan and what lender is best for you.
Here are five tips to help you make your decision.
Choosing the right loan for you.
If used properly and wisely, a personal loan can be a great idea, it can be a small expense which can save you from falling into deep debt. These loans have the potential to help you become more in charge of your finances and can help you work towards your goals.
But, you must choose the right one for you, and you must also use them wisely too.
1. Why do you need the loan?
One of the first things that you need to think about is why you require this loan in the first place. People take out personal loans for a whole ocean of reasons, define yours and this will help you in your choice. If you need to break free from credit card debts, a personal loan can be used for debt consolidation to gain a smaller interest rate and bring all your debts together in one place.
If you are having an emergency, personal loans are also useful for this too, however, make sure that the loan will be given to you in time for the emergency. Some can take a few weeks.
These are just two examples of why you might need a personal loan, however there are so many.
2. Consider interest rates.
As you go on the hunt for a provider for your loan, shop around and look at interest rates. Compare plans and decide which best suits you. Some personal loans might look great, but the interest rate might be too high, and you might risk plunging yourself into more debt. The slightest increase or decrease in interest can save you money in the triple or quadruple figures!
3. Always read the fine print- know what is included.
Interest rates are not the only thing you need to be cautious of, terms and conditions of payment and the loan need to be properly looked over. This can include things such as the repayment schedule, the maximum duration of the loan and how long it will take for approval.
Always read this fine print, as it can be the difference between a loan that helps you and a loan that makes your situation worse.
Appearance can be deceptive in some cases, they might seem to offer great rates with low interest, but when you start to do the math, you might find that you end up repaying even more instead.
Checking the fine print keeps you out of this trap.
4. Don’t be afraid to consider your bank or credit union.
While companies online may have grown a lot, and gained more popularity recently, they are not always the best choice. Banks and credit unions also offer personal loans, and their rates and fees might even be better, as they can often be less competitive, especially if you are not already with the bank, they will want your business. If you have a relationship with the bank, and if you have good credit, your bank can be the best port of call for you.
It is also worth checking out nonprofit credit unions, as they will typically promote personal loans with rates and fees that can beat what your bank would offer you.
5. Build a good credit score.
Last of all, take into account your credit score. Your credit score will dictate your eligibility for a loan, and how much interest you will need to pay on a loan. If your credit score is shabby you are less likely to get approved, and even if you do, your interest rates will be higher than someone who has a better credit score.
You can improve your score by paying off revolving debt, paying bills on time, every time, and more.
Your credit score shows lenders your reliability when it comes to paying back a loan, so ensuring it looks good will grant you better deals and more options.