If you want to borrow a small amount of money and pay back a fixed amount every month, then a personal loan could be a great option for you. Personal loans are loans that are given to you by a bank or another lender. Unlike secured loans, they’re not fixed against any asset such as your home or car, which can make them a less risky option for borrowers.
Of course, there are many benefits to consider with personal loans, and many negatives to think about to. For instance, with a personal loan, you might be able to borrow more than you can get with a credit card, and your loan repayments will be fixed every month, which makes budgeting easy. Usually, the interest you pay on your loan can be quite low, and you can choose exactly how long you’d like to take to repay the loan.
Because personal loans are so appealing, some people even turn to these financial options as a way of consolidating numerous debts into a personal loan. This means that you can ultimately reduce your repayment costs if you have numerous debts to worry about. Of course, remember that this can mean that you extend the time of your debt overall.
What to Think About with Personal Loans
When you take out a personal loan, either to pay for your home improvements, your wedding, or your vacation, you’ll get a fourteen-day period for cooling off from the day the loan agreement is signed, or when you receive a copy of that agreement. If you decide to cancel that loan, you’ll have thirty days to repay the money that you’ve been given.
During the cooling off period, you’ll be able to re-consider the things that you hopefully thought about before you began taking out the loan in the first place. For instance, keep in mind that you won’t always get the interest rate that is advertised by the lender. Usually, you’ll see a representative rate of the lender, which will be given to just over half of the people who are given alone.
However, if your credit rating is less than perfect, there’s a very good chance that though you might be accepted for a loan, you will also be charged a much higher interest rate too.
Keeping Track of Personal Loans
One of the key things you’ll need to consider when you take out a personal loan, is that some of these financial devices come with variable interest rates, which means that they can move rapidly up and down. If you can only just afford the initial repayments of your loan, then there’s a good chance that you should avoid this type of loan in case the amount you pay needs to go up.
Another thing that’s worth considering, is that you should look out for any arrangement fees or additional costs that could make your loan more expensive. Make sure that you think about all the different expenses that can arise in your personal loan when you’re working out how much borrowing is going to cost you.
Most of the time, arrangement fees should be included in the APR- this is why it’s so important to compare APR instead of just the interest rates of different providers. You’ll also need to make sure that you think carefully before you accept any of the PPI options that a lender might offer you. Although this kind of insurance can be helpful, it has been frequently mis-sold in the past which has led to a lot of different problems.
How to Get the Best Personal Loan Deal
If you want to get the best deal on your personal loan, then you need to be careful. In other words, make sure that you don’t simply accept the first rate that’s offered by a bank or building society. Take your time and shop around to see which providers are offering the cheapest possible APRs. Compare these numbers and keep in mind that you could easily end up paying more than is advertising if you have a bad credit history.
At the same time, you might consider asking the lender to give you a quote on what you can expect from your loan before you officially apply for any finance. If they have to do a credit check for this, you can also ask if they would be willing to do a quotation search instead, as this will not leave any black marks on your credit record, unlike an application search, which does.
Additionally, consider taking out peer to peer loans in some cases if you have a good credit score. Sometimes these loans can offer much lower rates of interests and can be available for smaller amounts too. So make sure you see what’s available to you.