There are many reasons why you may want a personal loan. Maybe you need cash for an emergency or have an unexpected bill. You could want to consolidate some debt. Maybe you had some credit problems in the past and are looking for a way to try to reestablish your credit. Whatever the reason you want a loan, finding the right one can be a little overwhelming. Here are some tips to help you find the best loan for your needs.
Avoid Short-term Loans
It’s easy to be enticed by companies offering quick cash, especially when you need money right away and there don’t seem to be any other alternatives.
These are high-risk, high-cost loans. You only have two weeks to repay the loan, in most cases. Interest rates can be over $300%! If you feel you have no choice but to take a payday loan, make sure you borrow from a lender licensed in your state and that you are familiar with the payday loan laws in your state.
Titles loans companies require you to use your vehicle title as collateral. In addition to high interest rates, title lenders are known for moving extremely fast to repossess a car if the payment is late.
To get the best loan possible, it’s important that you shop around. Check out banks, credit unions and online lenders. Avoid any online lender that asks for an application fee, as this is a sign of a scam. Check out the reputation of any lender you considering borrowing from.
Be an aggressive consumer. When shopping for a loan, make sure you ask about:
- Credit requirements- Find out what kind of credit score is required in order to get a good interest rate. If you are close to that credit score, it may be worth postponing the loan until after you raise your score.
- Security- Find out if any collateral is needed. If you need to use personal property to secure the loan, be aware that you could lose your property if you don’t repay the loan as agreed.
- Rates, Fees and Term- Be sure you understand the size of your monthly payment and how many total payments you need to make. Ask whether or not their interest rates are fixed or variable. Be sure you know what fees come with loan.
- Penalties- Also ask about what happens if you default on the loan, what kind of fees and penalties are charged. Ask if you are able to defer a payment if necessary in order to prevent defaulting.
Know Your Limitations
In order to make sure you are not getting in over your head, be realistic about the personal loan you want. You may want the maximum loan amount, but you have to be sure that you can afford the amount of this loan, the interest and fees, as well as a commitment to the duration of the loan. If you are trying to rebuild your credit, it is a good idea to start off with a small loan, one you can easily afford to repay in the allotted timeframe. Doing this will show a history of timely payments, and will improve your credit over time.
Use these tips to help get your personal loan. Moving cautiously may take a bit longer to get your loan, but it will protect you from getting in over your head.