Considerations Before Applying for a Personal Loan

Consider a Loan

Personal loans are useful in a number of different ways. With statistics from a report compiled by the National Credit Regulator in 2012 showing that the number of unsecured loans provided rose from 5 million to over 8 million (2008- 2011), it’s important to look at a few factors before applying for a loan.

Credit Rating

Check your credit rating scores for any errors. These scores play a vital role in your credit eligibility. At times consumer scores may be lower than what the scores should actually be.

Compare Loan options

Annual percentage rates are important to consider. Research thoroughly and compare different loan options before making a final decision.

Loan what you can afford

Many lenders’ websites have calculators which are useful in evaluating how much clients can afford. Apply for a loan once you are certain you will be able to afford the repayment terms.

Avoid Default Penalties

Lenders charge interest on overdue loan payments. Ensure that you will be able to pay on time in order to avoid penalties.

Consider Interest rate types

Interest rates can either be fixed or variable. Variable interest rates may seem more enticing, but fixed interest rates are the better option in the long run. With the former, interest is paid at the interest rate for that month but with the latter; interest is paid at an unchanging rate.

Loan Insurance

This insurance covers your loan in the event of sickness or unemployment. Lenders may offer this option or you can consider a different entity to insure the loan.

Financial Documents

Financial documents required for the loan to be processed should be at hand before applying.

Unsecured versus Secured Loans

Consider the risks that come with secured loans. With unsecured loans, there are fewer formalities and product complexities while with secure loans, the lender aims to recover their money from asset security if the client defaults.

Read the Fine Print

Check your eligibility beforehand. Ensure that you fully understand the terms and conditions of the loan agreement.

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