Unlike mortgages or car loans, personal loans are usually flexible and give consumers many options. Individuals can use the money to buy a house or car and can also use the funds obtained from personal loans to cater for cell phone bills and even splurge on a shopping spree.
It can also be easier to obtain a personal loan in comparison to other types of loans, which ultimately depends on the lender. However, there are times when the easiest loan to get is not always the best solution for one’s financial situation. There are a number of key aspects that need to be considered prior to getting a personal loan.
1) Credit Score
Several personal loans are gotten primarily on the basis of a person’s credit profile instead of providing collateral such as a car or house or submitting a lengthy business plan. The borrower’s signature on these types of loan documents is the only actual agreement of payment.
A person’s credit score is a major determining factor for the approval of traditional personal loans. Various lenders may look at an individual’s whole credit profile rather than focusing on the credit score, which will determine how easy or hard it will be to be approved.
2) Interest Rates
Depending on the lender and the borrower’s credit profile, the interest rate and APR varies widely for personal loans. Some loans charge relatively low interest rates, especially when customers have good credit. Higher rates may be charged by conventional financial institutions when customers have poor credit.
A conventional personal loan offers the advantage of being based on installments rather than a revolving credit basis. Installments reduce the principle amount on the loan gradually until the loan is fully repaid.
3) Repayment Period
Repayment periods for loans may range from months to years. A payday loan usually has repayment periods that are measured in terms of weeks or days since they are linked to a person’s pay.
Collateral is not usually required for many personal loans. However, some title lenders or payday lenders require customers to give up the titles of their homes or cars in exchange for the loan. Although they possess the collateral, the customer still keeps possession of the car or remains in the house. However, falling behind on payments presents the risk of the car or home being seized in order for the loan to be repaid.
Some lenders such as payday lenders impose penalties for pre-payment if a person fully pays the loan before the due date. Other lenders, including finance companies, credit unions and banks allow people to prepay their loans without being penalized.
One of the key advantages of getting a personal loan is that in numerous cases, there are no limits on how the money can be used. The lender’s main concern when dealing with personal loans is whether or how the money will be paid back rather than how it will be spent. It is important to ask ahead of time if there are any uncertainties regarding possible limitations on spending the funds obtained from the loan.
7) Types of Lenders
A wide range of lenders provide personal loans. Finance companies, payday lenders, peer to peer lenders, credit unions and banks are all options for obtaining personal loans. While credit unions and banks usually charge lower interest rates, lending standards are often stringent and may require good credit scores.
Credit unions and banks may need a co-signer before approving a person for a loan, which is usually based on the credit score and if collateral is not being provided. Other lenders such as payday lenders do not usually need co-signers, regardless of how poor a person’s credit score may be.
9) Paying on Time
It is crucial for people to contact their lenders as soon as they realize that they are not able to make payments on time. This may make it possible to delay or reschedule a payment. A credible lender will probably be willing to work with the borrower in this type of situation. However, caution should always be exercised when requesting for payment to be extended. Paying on time helps to prevent being caught up in the trap of endless minimal payments and getting deeper into debt.
When it comes to obtaining a Lending Bee’s lowest interest rates for personal loans, there are several products that are available for consumers. While determining the right type of personal loans in Singaporewill depend on factors such as repayment ability, assets and reasons for getting the loan, there are certain things that a person should look out for when making comparisons between different personal loans. These include interest rates, flexibility of loan repayment, fees and charges and loan terms.
If a person is planning to start a family, needs some extra money for a dream wedding or want to buy a new car, a personal loan may be the ideal financial solution to fulfill these desires. Getting a personal loan is an important decision and key considerations should be made before applying to make sure that people get closer to their goals.