Tips before applying for a personal loan

Personal loans are a convenient way to solve cash flow problems. Personal loans can help someone fund a new business venture, pay medical bills, pay education fees, etc.There are however certain important tips you can consider in this regard.

Check Your Reports – While you are looking at your FICO scores, check your credit report for errors. All too often people end up with lower scores than they should because of errors on their credit report. If you can find and correct these errors before you apply for a loan, then you will greatly improve your chances of getting favorable loan terms.

Shop Around – Different lenders have underwriting guidelines, so not all their offers will be the same. Fill out an application at a website like personal loans or even and they will submit your application to different vendors.

Know the Fees – Almost all personal loans have fees besides principle and interest. Examine all your loan offers carefully and look for “hidden” fees. Sometimes a lender may charge a lower interest rate, but charge higher fees to make up the difference.

Figure Out What You Can Afford – The longer you have a loan out, the more interest you pay. Before you even apply for a loan, you should know how much of a monthly payment you can reasonably afford.

Repayment Penalties – Lenders lose interest if you repay the loan early. Some lenders will include penalty fees for paying off the loan early. Your best bet, if possible, is always to get a loan with no early repayment penalties.

Type of Interest Rate –There are two types of interest rates, variable and fixed. Fixed interest rates tend to be higher, by comparison, when you take the loan out, but your monthly loan payment will always remain the same. Variable interest rates may be low when you take out the loan, but as the interest rates changes so do your loan payments. On the surface, a variable interest rate may seem attractive, but a fixed interest rate is your safest bet.

The above tips will really prove handy.

Categories: General