by Janet Robinson | The Village Connect |
A personal loan offers a number of options to you unlike a mortgage or a car loan. You could be using the amount for buying a house or perhaps a car, you could also consider using the funds from your personal loan for shopping or paying your cell phone bill. So, you could use your personal loans for practically anything you wish to divert your funds to depending on your requirements. A personal loan could be obtained much easily than any other loans. However, often the easiest obtainable loan may not work out to be the most suitable for your financial well-being. Here are some very important factors to consider while getting a personal loan for you.
The Required Credit Score
You may not have to offer a car or a house as collateral or you do not require submitting any complicated business strategy or plan for getting a personal loan. Such loans are often referred to as signature loans since the only actual guarantee of payment would be your signature that appears on your loan agreement documents. Your personal loan approval depends heavily on your credit score. Many lenders would be interested in examining your conclusive credit profile and not just the credit score. This could make things much easier or difficult, as far as, approval is concerned.
The APR & the Interest Rate
It is essential for you to find out the rate of interest and the APR or the annual percentage rate as this could vary hugely, as far as, personal loans are concerned. Some personal loans from banks and credit unions would be asking for pretty low-interest rates especially, for consumers with a good to brilliant credit score. Traditional finance firms would be charging a higher interest rate in comparison to credit cards particularly, to consumers having a poor credit.
Remember conventional personal loans could be installment based, instead of being based on revolving credit. Installment loan payments could ultimately bring down the principal on the loan till the loan has been paid in full. As opposed to the installment based personal loans, if you are making minimum payments on your credit card, you would be potentially making the payments for several years without really cutting down the principal or the total amount of money you owe.
Loan Repayment Period
When you are looking for personal loans including personal online loans, repayment period would generally be ranging from some months to some years. Payday loans’ repayment periods are actually measured in days or weeks as they are tied together to your specific pay periods. Pawn shop repayment periods would be varying but would be actually less close to those meant for traditional lenders.
Several personal loans would not be requiring any collateral. But when you borrow from any pawn shop, you would require providing collateral in exchange for your personal loan. Moreover, some title lenders or some payday lenders would necessitate giving up the title to precisely your home or the car when you take the loan. This, however, does not mean that you would require relinquishing possession of the car or the home. Be careful in case you are falling behind in your monthly repayments, there is much at stake as your car and the house would be seized for repaying your loan.
If you are financially better off in the future, you may wish to pay off your lenders as that would be the most responsible thing to do from the finance point of view. However, several lenders including payday lenders would be imposing heavy pre-payment penalties in case you are paying off your loan in full, much before the due date. Responsible lenders such as credit unions, banks, and financial firms, however, would not charge any sort of penalties for prepaying your personal loans. In fact, in some cases, you are given a better rate of interest or a special discount on any such future loans.
In addition to these fundamental factors, there are many other factors to consider including if there are any restrictions regarding the way you are going to use your loan amount, the type of lender involved if a cosigner is required etc. Personal loans are great for assisting individuals with poor credit to get those people very much back on track. Remember to get in touch with your moneylender at once, if you realize that you would fail to make the scheduled payment. Avoid requesting any loan payment extensions.
Author Bio: Janet Robinson is a financial expert who is attached to a bank and specializes in personal loans. She has taken to blogging in a big way, only recently. However, she has gathered several fans.