Personal loans can be a very helpful way to secure a modest sum of money for some pressing need without having to provide collateral in exchange. However, just like with any loan, you don’t want to proceed imprudently. Here are five tips to help you get your loan in such a way that it doesn’t become a burden.
Make Sure It’s the Best Option
Fortunately, most lenders are incredibly careful about whom they offer loans to these days, so they’ll handle a lot of the due diligence on their end. That being said, we still recommend that you take some time to think through this decision and make sure it’s the right one.
As a personal loan is given without the safeguard of collateral, the interest involved is going to be much greater than, say, if you took out a home equity loan. This is just one example of how an alternative might make more sense and still meet your needs.
There are three types of lenders these days:
- Online lenders
- Credit Unions
Thanks to the Internet, you not only have access to all of them, but can also take the time to do some comparison shopping. Terms and interest rates will vary greatly across these three options and even amongst the various institutions in each category. Take as much time as possible to consider each and every option.
Be Careful if You Plan on Consolidating Credit Card Debt
Currently, the most popular reason for taking out a personal loan is to consolidate credit card debt. This isn’t necessarily a bad idea, but make sure you stick to this important goal. A lot of people succeed in consolidating their debt, but then fall into the temptation of using this fresh line of credit on something else.
Don’t Take More Than You Need
Speaking of temptations, another common problem is people getting approved and then deciding they could actually use some more borrowed money because they just remembered other goals or projects. If you really need to borrow further, nothing will stop you as long as your credit remains fine. For now, take the bare minimum you know you need and not a penny more.
Confirm Your Credit Score Is Accurate
As you probably know, a lender will check your credit score before giving you a loan to make sure you’re going to be able to pay them back. However, these scores can be mistaken. This is why it’s always wise to pull your score regularly and check to ensure its accuracy. If it’s not, don’t apply for a loan until the agency has fixed the mistake.
Scour the Fine Print
Before you accept a loan, you absolutely must ask for all the details to be spelled out in writing. Then go over each and every word, asking for clarification where necessary. The fine print can often hide some nasty surprises, especially when a loan seems too good to be true, so don’t sign a thing until you understand what you’re getting yourself into.
Follow these five tips and not only will you have a better chance of securing that personal loan you need, but paying it back without any problems too.