Loans are generally self-explanatory. In most cases, what they help you finance is read in the name: But what about those loan types that aren’t that obvious? For instance, what s a personal loan, who should have it and for what particular reasons?
A personal loan is essentially an unsecured loan, meaning you need not put up collateral or a down payment before you receive money. You can for a personal loan at several financial institutions – for instance, banks, lending companies, credit unions, and the like. In any case, do shop around before applying for this type of loan as interest rates, terms and other details can vary significantly from among providers.
So how does a personal loan work?
The good news is, it’s rather simple. Once you have applied and received approval, you’ll get the money you asked to borrow in a lump sum deposited in your bank account. Then you are expected to repay that loan in installments. The amount of time you are to pay off that loan will depend on the terms that set by your loan provider.
The interest you pay, on the other hand, will typically be determined by your credit score. The better your score, the lower your interest will likely be. A good rate will mean savings as you repay the loan because you’ll be expected to pay a lower interest rate.
Always go for a fixed-rate loan so that you pay a fixed interest rate throughout the entire term of your loan. All such details must be explicitly stated in your loan contract. Even more crucial is that you read the whole document very, very carefully, especially the smallest detaild before you actually sign any paperwork.
If there are questions in your mind, don’t hesitate to ask the loan officer so you know exactly what you’re getting into.
Here are items you totally need to be clear about regarding personal loans:
> Interest rate > APR
> Origination fee
> Loan terms
> Whether interest is fixed or variable
> Other things that might be included in the loan
> Prepayment fees, if any
> Fees for late payments
Most definitely, it is important to know as much as you can about personal loans before applying for one. The more you know, the wiser your choice of a loan and loan provider will be. Remember, which you will surely find several out there, no two of them are exactly alike. As always, never skip your homework.