Four Things to Consider While Taking Out a Personal Loan
These days it is quite common to receive at least one email or call daily regarding application for a personal loan, a vehicle loan or any other type which is on the market currently. These applications look impressive at first, but you need to be equally sure about what is in it for you. Look at resources like https://www.loanable.com/ to help you out.
The Four Things to Note Before You Take a Personal Loan
Have you agreed to a personal loan after seeing an advertisement but then it failed to live up to its hype? Here are four tips to consider before you go for a personal loan.
Know What You Need
Sometimes, bank executives with their attractive applications and advertisements might try to lure you into a deal that may be too good to be true. They may even sell you a loan that may exceed the amount you need at the moment.
You need to be headstrong. Finalise the total amount you need to borrow and avoid taking a penny more. If you wish to acquire three lakhs, take a loan worth three lakhs only. Remember that a personal loan is one of the most expensive forms of debts. You do not want to end up paying interest on the amount that you didn’t even require in the first place.
Research on all The Hidden Costs
There are several other charges other than the interest rate that you need to pay for while purchasing a loan. A few of them are below.
- Processing Fee –
Remember, the lower the processing fee, the better. It is a fee which adds up to the total cost of the loan. Usually, banks charge a flat processing fee, or it may range between 1-2% of the loan amount.
- Prepayment fee –
Prepaying a loan helps to work out your interest cost. Under prepayment, you pay off a particular portion of your credit as and when you have the required funds. However, under this tool banks ensure that the customer stays in the loan and pays the full interest amount.
- Late Payment Fees –
If you default on your pending payments, you may have to pay a late payment fee.
As personal loans are unsecured debt, you tend to pay a considerable amount of money regarding interest payments. There are two types of Interest Rates – Fixed Interest Rate and Variable Interest Rate. You may opt for either of them. The key here is to research on the loans available in the market and choose for the one which fits the bill to the T.
Before applying for a loan, make sure to check your credit score. It acts as a guide to choose the perfect investment and the likely prospects of it getting sanctioned by the financial institutions. Make sure to pay them off on time to have an ideal credit score.
Keep in mind the above points while purchasing a personal loan and remember to pay all your debts on time to avoid hurting your credit score.