Personal loans can help people in a lot of ways. Maybe you’ve found yourself with a hefty bill, or you’re trying to wipe away past debt. Perhaps you have a wedding to pay for or need to replace an aging car with a nice, shiny new car. If you are thinking of taking out a personal loan, take a look at our pointers before you commit.
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Your income
The first thing you need to consider when looking for a personal loan is whether you can afford it or not. This means looking at the loan amount, but also if you can cover the repayments over time.
As a rule of thumb, try to only borrow the essential amount and make other plans for the rest. Remember that additional fees will come with a personal loan over time, so make sure to account for that when looking at your finances.
The credibility of the lender
We all know to keep away from loan sharks, or we’ll end up in our own Squid Game situation but figuring out who is reliable amongst companies that aren’t The Mob is a little trickier to decipher.
Once upon a time the banks were the only reputable, and therefore safe, option, but today there are lenders everywhere. You will have to sift through the credibility and reviews of the personal loans you are looking at. Take a look at sites like this to review top personal loans to satisfy your curiosity.
Your credit score
Taking out a personal loan can both hinder and help your credit score. Which way that goes is entirely up to you. If you are paying on time with no regular problems, you could help your credit score by mixing better credit, rather than sticking to credit loans, like credit cards. It will also establish a payment history, which can boost your credit score.
However, if you are taking out a personal loan to wipe debt, for example, you might find yourself even further in debt. If you take a look at your credit score, you might get an idea of what kind of position you’re in and what you can deal with.
The interest rate
Another thing to think about, probably the biggest factor in choosing your personal loan, is the interest rate. Your payments will go up over time due to the interest rate, so no matter the loan, it is in your best interest to get it paid off as soon as possible.
However, in addition, the interest rate can go up over time. Interest will have an effect on your EMI, or Equated Monthly Installments, making it harder to pay off as time goes on.
There are a lot of interest rates across the board of personal loans, so you will want to look for one that suits you.
The prepayment options
What can help with the interest rising over time is the prepayment options. Not all personal loans guarantee an option to inject your repayments with a surprise addition of cash, should you get some good fortune your way.
If you were to find yourself with a decent bit of money and you want to put it towards paying off your personal loan, you might find your policy won’t allow for it.When you are shopping around for your personal loan, take a look at the prepayment options. Even if you don’t have a sudden wave of money coming your way, the ability to pay a little bit more on your debt repayment any month you find you’ve budgeted well will mean reducing the repayment period.