What you need to know when applying for the best personal loans to meet your financial needs
When it comes to personal loans, there are quite a number options available. Some factors you need to consider for you to know the best personal loan to request for include how much you intend to borrow and if your credit score is attractive. Here are some of the tips for you to find the best personal loans to meet your needs.
- Compare different lenders. Thanks to development in technology, the internet offers a convenient platform for you to find a wide range of lenders and compare their rates and terms. You can easily explore different lenders from a single place and select the one with the most affordable rates and convenient loan terms.
- Read the fine print. Even before committing yourself to a personal loan, it is important that you read and understand the loan terms and conditions, interest rates and monthly installments to be paid.
- Find a low-cost loan. It is also advisable that you apply for a loan with the lowest interest rates and low or no additional fees incurred.
- Read reviews. When a borrower applies for an advance, they, in most cases, leave a review behind after fully repaying the loan. By reading these reviews, you will know the experiences of past clients and judge whether a particular lender is the best option for you.
Common uses of personal loans
Borrowing money and repaying back in installments can seem to be the best option, no matter what your financial goals are. You can actually be surprised by the number of things you can do with a personal loan. Best personal loans can come in handy when you want to consolidate past loans with a high interest rate, for emergency situation or paying for major expenses. A recent research indicates that 26% of people who take up personal loans do so to cater for medical expenses. Other borrowers request for the loan to start a small business. However, this does not mean that the loans can be used for every need. Here are some of the ways you can use a personal loan, together and some of the key factors to consider.
- Debt consolidation. If you have a number of debts and want to repay them at once, debt consolidation can be the best solution. By consolidating your debts, you need to take up a new loan, pay all your previous debt for you to remain with one single loan. One of the benefits that come with using personal loans for debt consolidation is that you will be sure of how much to pay per month in form of installments and how long it will take to clear the debt. You actually can’t achieve this by use of a credit card. But it is also important to weigh your options before deciding if a personal loan is the best alternative compared to balance transfer credit card. Among the things to consider is how your credit score will be affected and which of the two option will be the cheapest. For instance, avoid taking out a debt consolidation loan that will incur higher rate compared to a balance transfer credit card.
- Medical expenses. It can also be helpful to take a personal loan to cater to medical expenses, and especially when you are out of options. But before making this decision, it is important to confirm with your lender and find out if they offer a payment plan. This will help you make repayments without incurring extra interest.
- Car purchase. Some borrowers also request for personal loans with the main aim of purchasing a car, but is it really worth it?The decision entirely lies with the borrower. But this also depends on the type of car you want to purchase, its cost and if you will be using it for productive purposes to help repay your debt. However, car dealership will offer better interest on car purchases compared to personal loans. This is because most personal loans are unsecured, but with car dealership, the vehicle itself will be used as collateral. On the other hand, you can consider a personal loan if you are purchasing an already used vehicle from an individual rather than going for car dealership.
- Home renovation. Many individuals use home equity loan for home improvements. However, not every borrower will have enough equity to qualify them for the loan. Besides, your home will be used as collateral when taking up the loan, meaning that you may risk losing your property if you miss payments. This is where personal loans come in since the borrower can easily qualify for the loan regardless of the amount of equity they have in the home. Besides, borrowers will not risk losing their home due to late fees repayments or failing to adhere to the loan terms.
- Moving expenses. As much as relocating can be expensive, it is important to come up with every means to help cut down moving expenses. If you do not have sufficient funds, requesting for a personal loan can be helpful. However, you need to consider the interest rates, additional fees incurred and repayment term before deciding if it is the best alternative for you.
- Starting a business. A considerable number of individuals also take up personal loans to help boost their businesses. If you have a startup up business that is yet to stand on its foot, chances are that you will not qualify for a business loan. In this case, personal loans can help finance the business.
- Boosting your credit. Personal loans can also help borrowers boost their credit score. But you also should avoid putting yourself in debts with the mere aim of improving your credit. If you want to boost your credit without necessarily incurring debt, you can apply for a secured credit card. Regular use of the card can be helpful.
- Emergencies. Personal loans can be the best alternative compared to other loan types when it comes to emergencies. This is because the interest rates are not only low, but borrowers also have the option to pay off the total debt before signing up. But then, you first need to consider if borrowing is the only option available or you can still use other ways to generate the money you need.
Are there any risks when using personal loans?
Borrowers use personal loans to meet their financial goals. But this does not mean that the loans do not come with risks. Some of the dangers you need to be aware of when requesting for a personal loan are:
- Overspending. Personal loans can come as the last resort when there is no other option available. However, financial experts explain that the loans are among the easiest to use. Not even the lender will ask you why you are taking the loan and what you will be using the money for. You can find yourself using the loan to purchase things that are not really worth it. If you do not spend the loan wisely, you can end up paying the loan for years, and find yourself living a life full of regret.
- Failure to repay the loan on time will damage your credit. If you do not borrow too much, you can easily repay the loan according to the agreed upon terms. But you may not afford the payments in case you lose your job or any other arising issue. This will eventually have a negative effect on your credit score.
- Bad financial habits. Getting in the habit of borrowing money as soon as you need it can land you in a financial crisis. While it is much easier to qualify for the best personal loan, continuously relying on credit is not financially healthy.
What to look for in a personal loans
- Repayment flexibility. For you to choose a competitive product, you need to compare the interest rates and extra fees charged since these are what determines the overall loan cost.
- Short loan term. Going for a long-term loan might look attractive since you will be paying less monthly amounts. But eventually, the loan will end up being more expensive. This is because longer payment period means incurring more in terms of interest.
- Understand the loan process. Before requesting for the loan, it is important that you review your credit score. Loan requirements also vary from one lender to another so do not hesitate to inquire about the requirements with the lender before starting an application process. You also need to confirm if the loan can be applied online since some lenders do not allow online applications.
Personal loans can come in handy when you need cash to cater for emergency services. You can also apply for the loan if you want to purchase a basic item that your family really needs. However, it is important that you consider your options before signing any personal loans deal. Remember that you also need to make timely payments!