There are times in our lives when it becomes necessary to secure a personal loan to take care of expenses. Whether you find yourself faced with unexpected expenses or you are searching for a personal loan as a way to combine debts, there are factors that you must take into consideration. Choosing the best personal loan means doing diligent research on the companies that offer the loans along with interest rates, payoff periods and hidden fees; being aware of these factors when choosing a personal loan is the key to ensuring that you do not get any unexpected surprises.
What to Look for in a Personal Loan
- Interest Rates – interest rates on personal loans tend to be higher than most other types of loans. However, this is also dependent on your credit worthiness so be sure to check your credit report before applying for any personal loan. If an interest rate is high it means that your credit worthiness is not up to par with the requirements of the agency issuing your personal loan.
- Loan Schedule – In terms of loan payoffs, the sooner you pay off your loan the less interest you will pay – a personal loan is no different. Of course, it matters how much you have borrowed and how much you can afford to pay each month. If you find that you are only able to make the minimum payment each month, you may want to look into another option rather than securing a personal loan. Loans with longer payment terms will also cost you more money in interest while shorter loans may have a higher payment but you will be paying more of the principal and less in interest.
- Hidden Fees – Make sure you read the contract for your personal loan thoroughly. You want to make sure there are no hidden fees like you may find with a credit card. Origination fees and late payment fees should be stated clearly on the loan contract as well as any prepayment penalties. Some companies charge a prepayment penalty in order to gain the interest that they would otherwise lose out on. Ask your loan officer for any clarification and for best results consult an independent attorney to review your personal loan contract for you.
When it comes to securing a personal loan, knowledge is power. Ensure that you have educated yourself on the loan process before applying for one by using the above tips.