If you are in immediate need of money and need to take a loan with the least amount of hassle and interest, a personal loan is definitely your best option. These days you can apply for a personal loan easily through an online portal, and the rate of interest will be lower than all other credit options. If you have valid reasons, getting personal loans to become all the easier.
However, a common mistake that people do is to jump into a personal loan without doing any further research. Different organizations offer different rates, and you will be able to save some money in the process. Only looking at the rates won't help. There are a few other aspects that you need to consider when you apply for a personal loan.
Choose different kinds of lenders
When you are looking for a lender concerning a personal loan, don't stick to a particular type. There are different types of organizations that give the option if availing personal loans and you should be aware of all of them so that you can choose properly. Secure loans are one such type where the interest is low, but the collateral mortgage has to be valuable.
The unsecured loans have higher interest rates but no mortgages. Credit loans give you the option of customizing your amount according to your convenience, small loans from credit unions and peer to peer loans between individuals who are not related in any way. Based on your capacity and financial situation, you should make that call.
Look at total costs
When you apply for a personal loan or any other loan for that matter, it is not only the loan amount that you have to repay. There are interests, processing fees, and additional associated charges that add up to the total cost. You should be aware of the total costs before committing to a loan so that you don't end up with an exorbitant amount at the end.
What is more important is the fact that the additional charges are generally negotiable, that is, different lenders may have different fees and interest amounts. Therefore, you can make a better choice only after you know the total cost that you have to pay back after taking the loan.
Fees associated with a personal loan
Like mentioned before, a personal loan is not the only financial burden that you have to bear. Whenever a lender or an organization facilitates the loan for you, they take some kind of processing fees, establishment fees, servicing fees, fees for an early exit, withdrawal fees and other surcharges which are basically a percentage of the total loan amount.
When compared to the loan amount, these costs may be small, but when you look at the bigger picture, it becomes quite significant eventually. You should have a legal paper depicting the fees, and the terms and conditions should also be laid down in details so that there is no scope for disagreement during the later stages.
Compare loan offers without hard credit inquiries
There are quite a few offers with respect to personal loans that have a soft impact on the credit amount, and thus, your credit inquiries remain minimal. Loan lenders can even research for you and give you the option of loans with the least financial impact. Sit and compare the offers carefully before zeroing on to one. Even if your credits go out of proportions, you can opt for agencies that will help you with credit repair and set everything in place.
Do avoid payday loans
There is one kind of loan which has become popular because stringent measures are not taken to approve it, and most people become eligible for it without any major hassle. Hard cash is deposited into the account directly, and you get access to it without any problem whatsoever. These loans are called payday loans. There is a catch to it, though. You have to repay the loan in 2 weeks. The interest rates are also pretty high compared to other loans.
Moreover, if you are unable to repay the loan within the stipulated time, you can ask for an extension. There will be additional charges which will again be very high. There have been cases where the interest amounts for a loan have become almost equal to the loan itself. Therefore, you should not opt for payday loans unless required since the disadvantages outweigh the pros quite significantly.
Don't agree to a variable interest rate or pay large origination fees
This is a common problem associated with personal loans. Sometimes, the interest rate varies as time progresses. For example, the interest rate that might have been agreed initially will be applicable only for the first year, and as that period gets over, the interest rates increase. You have to be very careful of the trap as the initial interest will be much lower just to capture the interest of the borrower, but subsequently, it increases alarmingly.
When you are opting for a personal loan, do not agree for one which has a variable interest rate. For some loans, sometimes a large origination fee is charged, which will not play a significant role in reducing the loan amount. So, you have to be careful in that aspect as well.
Comparing loans the right way is worth the effort
Many agencies and organizations are ready to give you a personal and an ideal way to approach it is by comparing and contrasting it with the various options. Yes, this process might become a little more tedious and cumbersome, but what you have to keep in mind is the fact that you have to look at the bigger picture. Being in debt is not an ideal situation, but sometimes it becomes unavoidable.
Personal loans might be the only option you have left, but you should always strive to keep the loan amount to as minimum as possible so that the pressure is reduced anyway. Only when you compare different loans, you will get an idea of the market trend and can make that informed choice, which will be beneficial for you financially. Thus, it is going to be completely worth the effort.
Keep these points in mind while applying for a personal loan. You should not let the personal loan grow on you. Once the purpose is solved, you should start repaying as soon as possible and not let it become a headache.