Understanding Personal Loans Is Easy-Peasy, Lemon-Squeezy
Submitted by: I-Newswire
2012-02-17 14:00:23
Know your needs, know your lender, and know your terms
Tallahassee (OPENPRESS) February 16, 2012 - Personal loans are just one kind of loan available to those who qualify, but are a little more difficult to obtain because of strict qualification requirements. If you are considering applying for a personal loan, there are a few things you should understand first.
Personal loans are unsecured. This means the loan does not require you to use an asset as collateral. This is primarily why this type of loan is difficult to get. But just because you don't put up collateral, it doesn't mean there aren't consequences if you default on the loan. The lender can take collection actions, including reporting your payment history to the credit reporting bureaus, hiring a collection agency and filing a lawsuit against you.
Personal loans are fixed, which means you get a fixed amount, and the better your credit score, the more money you can borrow. Loans can range anywhere from $1,000 to $50,000. Bear in mind when you are determining which lender is right for you that you may be able to get more money and a better rate with a lender you are familiar with.
Personal loans have fixed interest rates, in most cases. This means the rate won't change for the life of the loan - the better your credit rating, the better your rate. It goes without saying that you want the lower rate, because the loan will ultimately cost you less money.
Personal loans also have a fixed repayment period. You will have an agreed-upon period of time to repay the loan. Longer periods lower your monthly payment, but mean you will pay more in interest. Some loans also have a penalty for paying the loan off early. Loan periods are stated in months, like 12, 24, 36, 48 and 60. Your interest rate may also be tied to your repayment period, meaning you may have a lower interest rate with a shorter term.
Applying for a personal loan can be tricky, so you may want to seek out a lender with whom you have history. You'll need to know how you plan to use the money, as the lender will likely ask.
As with all loans, choose which lender you wish to do business with wisely, and be sure you understand the terms and conditions of the loan before you sign on the dotted line.
And be sure you only borrow what you can afford to repay. Getting in over your head will only complicate your finances - and your life.
