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Thinking About Getting a Personal Loan? Here’s Everything to Know Before You Apply

Ask anyone and they’ll tell you that if properly managed, loans can actually go a long way into making yours a success story. Truth be told, with money borrowed from financial institutions is how most people get by. The trick, however, is to not get sucked into the vicious cycle of always being in debt.

As you already know, loans can either be short term or long term. Despite the length, however, the repayment structure is usually in the form of a fixed sum of monthly payments. And although there are several types, how about a look into personal loans?

How about a look into personal loans?

Unsecured = No collateral

A personal loan is unsecured, meaning that there’s no collateral attached to it. All the same, that doesn’t mean that there are no penalties for defaulting on payments. As such, one should choose a loan that’s as convenient to them as possible.

For starters, you should fully understand the true cost of the loan you’re getting. Making comparisons with similar offers from different banks is the way to go about this, as opposed to just choosing to go with what your bank offers.

Sure, your bank may offer preferential treatment to its long-term customers, but there could be more affordable offers elsewhere, and you won’t know unless you shop around. Also, different banks have different penalties for when one misses a payment, so it’s better to be well versed with all of your available options.

Obviously, financial institutions have to look at your credit rating before processing your loan. To minimize chances of the application being rejected, it’s best if you are in the know concerning your rating beforehand. Luckily, several bureaus offer the service for free and on a yearly basis. The better your rating, the cheap the loan the bank will offer you.

Check your credit rating before applying for a loan

They say the devil is in the details, don’t they? As such, you should read through the small print to confirm that you are indeed eligible for the loan that you seek. Lenders have certain requirements that a debtor has to have met before they’re given the money, so make sure you know what these conditions are and what they mean for you.

Early Repayment

There’s no issue with paying a loan within a shorter time frame, right? Wrong. Some lenders actually have a penalty for early repayments, so check that before proceeding to apply for the loan. And it goes without saying that if you think there’s a chance you may repay the loan at an earlier date, then one without an early repayment penalty is the best one to go for.

In your opinion, which one is better; multiple small loans or one huge one? Of course, the lump sum loan is the safer option because, in truth, you pay lower interest on a huge loan than on a small one. Therefore, going the multiple minute loans route would just be daft for lack of a better word. Who wouldn’t want to save that extra dollar?

The lump-sum loan is the safer option

And although we did agree that loans are how most people get by, having too many applications on your record may actually harm your chances. They may paint a picture of a desperate individual, or one that is in extreme financial difficulties. So unless you absolutely have no other option, don’t apply for that loan please J

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