The Five Most Important Things You Need To Consider When Getting a Personal Loan
A personal loan means borrowing from a lending entity, may it be a bank or some other credit provider. It’s usually paid back, later on, by the borrower through monthly repayments at an interest. This kind of loan is also considered as an unsecured one as it’s not backed by any collateral.
Going through adult life, you may find yourself needing to take out a personal loan for a variety of reasons. May it be for your dream wedding or to pay off unexpected medical bills, there are some things you need to know before signing your name to what basically is debt.
Follow these tips from African Bank head of product and customer value proposition Neil Thompson to go about more smartly in getting a personal loan.
Knowing the True Cost
Some banks may have preferential rates for loans for their account customers but that doesn’t mean a more affordable loan can’t be found from other providers.
When doing your research about which credit provider to borrow from, make sure to understand how much a loan would truly cost. This means taking into consideration things like payment due dates, interest rates and any other charges you may miss.
True to know about late penalties and their cost while doing your research. ‘Shopping’ around for a credit provider that may be able to give you a better deal than your current bank is also a great idea.
Credit Rating and the Fine Print
Before applying, check these two things first: your credit rating and your eligibility to be approved for a loan. To save time and avoid being rejected, only apply for loans which conditions you meet. Read the fine print as lenders may have requirements that’ll make you ineligible. Meanwhile, knowing your credit rating will give you an idea about what kind of deals lenders might provide you.
Clearing Up Charges
Having an ERC is a way for banks and other lenders to recoup what they may be losing in interest when a borrower breaks the loan earlier
If you’re planning to pay your personal loan earlier than the agreed time, then you may want to find a lender who doesn’t require you to pay early repayment charges (ERC). But if you push through with a loan that has ERC, make sure to know how much you’ll be charged before finalizing your application.
While it may seem counterintuitive, borrowing more can actually save you money in the end. This is because larger loans usually come with lower interest rates than smaller loans. So, borrowing an extra $500 can bump you up to a better interest rate bracket.
Only send out applications for loans you’re qualified for
Sending out too many loan applications may only end, making you look desperate and, therefore, lower your chances of being approved by your chosen lender. What you can do is minimize your applications by only going for loans which requirements you meet.
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