ASPECTS OF PERSONAL LOAN TO AVOID
Shopping for a personal loan online is not easy. But, it will help if you are aware as to what you want out of your loan, how to get the best rates and what the tricks companies use for making more money off you. If you have applied for personal loans in the past, then you are probably knowledgeable as to what to look for and what to avoid when looking for unsecured loans. If you are a first time borrower, it is a good idea to familiarize yourself with the information below.
Long loan terms – Typically broken down in months. This is the amount of time you will have to pay your loan back. Longer loan terms equate to you paying more interest which means more money. You monthly obligations will be lower but you will be paying more money over the life of the loan.
Penalties for paying your loan off early - Otherwise known as prepayment penalties. Find out before you sign anything whether or not you will incur any sort of fee for settling you loan early. It is very common for lenders to charge a prepayment penalty that will equate to the amount of interest for the loan term. They do this so that they avoid losing money. Therefore, there would be no benefit for paying your loan off early.
Fees – What are all the fees associated with your loan, i.e. missed payments, late payments, bounced checks, etc.. There also may be fees for making payments over the phone and even for making a payment with a credit card. All the fees associated with any loan should be clearly notated prior to applying.
Bad Credit Pitfalls
Payday loans – Nowadays, many lending institutions provide personal loans and payday loans. There are dangers associated with payday loans. However, payday loan interest rates are very high. In addition, payday loans only have one payment, a balloon payment, that is typically due within two weeks from the time the loan originates. Personal loans allow borrowers to pay back the loan over a longer term of months and even years.
People are often so desperate for cash that they don't ask the important questions about the details of their loans. Make sure you find out all the terms of your loan prior to committing. You don't want to be stuck with a loan that will end up costing you more than you borrow.
Being a Wise Borrower