Things to Consider before Taking Personal Loan


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There are several options of loans in the financial world and we may need in it for almost everything such as vehicle loan, home loan, business loan, personal loan, and even our credit card is also a type of loan. If you need fast cash option then personal loan is the best option. In a personal loan, you borrow a fixed amount of money, you will have a fixed interest rate, a fixed monthly payment, and you know when you will have paid off the loan in its entirety. It's really that simple and straightforward.

Is a Personal Loan Right for me?

A personal loan is great for anyone who is looking for cash loans. So, it's not a purchase that you can make on plastic with a credit card if you need cash. Personal loans tend to have the best rates for cash needs. Secondly, if you're looking to refinance your existing, high-interest rate credit card debt, a personal loan can be a great option because the interest rates are usually much lower than credit card interest rates and personal loan companies tend to approve people with much lower credit scores as well. So you have some great options. The only thing we would say is, if you have an excellent credit score i.e. 700 or above, you should think about a balance transfer strategy but if you can't do a balance transfer or you still have more debt that you need to reduce the interest rate on, a personal loan is a great option.

What Should I watch out for?

First of all, you need to make sure that there is no pre-payment penalty. Make sure that if you want to pay off that loan early, you can. Secondly, some banks and some financial services companies will try to sell you extra insurance on top of the loan, most of those are pretty bad deals. So be very careful and skeptical of those add-on insurance policies that they put onto personal loans. Finally, you're going to want to compare APR because most personal loans will charge you a fee and an interest rate. The combination of those two will give you an APR. You can ask the agent or check on some financial websites about the APR but when you're comparison shopping make sure you look at the APR which includes the fee and the interest rate and not just the underlying interest rate.

Do Personal loans have Fees?

Typically what happens is when you go out and you borrow money with a personal loan, let's imagine $100; there will be an upfront fee. It could be anywhere from one, two, three, or four percent so for that hundred dollars that you borrow if there's a 2% fee then that means you will have a $2.00 fee that you have to pay upfront. Now it's important when you apply for the loan to make sure you understand how that fee is paid for. Often and typically at some money lending companies, they'll deduct that fee from the loan proceeds. If you borrow $100 and there's a $2.00 fee, you'll end up being given 98 dollars when you receive the loan so make sure you pay attention to that.