Personal loans are indeed a good option for many; however, it is important that all consumers be educated about what personal loans are and what they require before signing on the dotted line. Here are some things to keep in mind when you consider taking out a loan.
- Fixed Repayment Periods
Just as you have to pay a car loan off in a certain amount of time, it is common for personal loans to have a fixed repayment period. The periods of time vary and it is advisable to pay off your loan in the least amount of time, and in a timely fashion (meaning, pay by the date it’s due). Not making payments on time may impact your credit score as well as reduce your chances of getting a lower interest rate the next time you apply for a loan. Paying your personal loan off early could also mean less interest rate charges for you in the future.
- Unsecured or Secured?
Personal loans are usually unsecured. This means that the lender will not require collateral and is taking a higher risk. Personal loans are sometimes referred to as signature loans because the lender is only relying on the borrower’s signature as collateral. The not using collateral comes at a price though, so be aware of what an unsecured loan requires of you.
- Higher Interest Rate
Due to the risk the lender is taking they are likely to set forth a higher interest rate for the loan. Nonetheless, some people might find that the high interest rate is still lower than a credit card, for example, that could offer them the same limit.
Part of the appeal of a personal loan is that it might be good for those with bad credit, who are unemployed, or who may not have the collateral needed for a different type of loan.
Applying for a personal loan can be an easy process for those who may need to make home improvements, pay for medical costs that aren’t covered by their health insurance, business expenses, and more. AmOne can assist you in finding the right lender offering you the best possible interest rate for you. Contact us to learn more about personal loans and to speak with one of our experienced Money Coaches.