A vast majority of people run into a situation where a personal loan is needed at least once in their lifetime. Now, while the circumstances and the reasons may vary, there are some general things that apply to everyone applying for a personal loan. The thing is – most of the first-time applicants for a personal loan don’t know that much about the hows and the whys of the entire process. In order to ensure that you get the best deal, it is important that you know about the most impactful parameters when it comes to getting a personal loan. If you don’t, the probability is high that you end up with a bad deal.
Now, if you are applying for your first personal loan, this article is going to help you by addressing all that you’ve read about so far. Here, you will find all that you need to know about the six most important factors that you must consider thoroughly before you apply. Let’s dig right in.
1. How much money can you expect?
The amount of money that you can borrow varies depending on your situation, and the most important factors to consider are your credit score and your monthly income. In fact, when it comes to borrowing from banks, you always have to take into account that there is a minimum income requirement. If you meet this requirement, in general, you can borrow up to four times the sum that you earn monthly.
Of course, there are alternatives to banks when it comes to personal loans. This is especially useful for those with a bad credit score, lower-income, and similar. So, if you’re in a situation where you take a loan from the bank, you can opt for online loans for bad credit, as you can borrow a reasonable sum without so much restriction. That being said, it is important that you do your research on all the possible options.
2. Different types of interest rates
Interest rates are a great tell on how good of a loan deal you’re looking at. The two most important terms that you must know about are Applied Rate (AR) and Effective Interest Rate (EIR). AR stays constant during the repayment and is considered a safer, less complicated option. EIR, on the other hand, can change over time and can be volatile as it depends on the state of the market in the future.
3. Additional fees and charges
You need to make sure that you understand all the fees and charges, not only the interest rate, as there is more. Firstly, do your research about annual fees when applying for a loan. There are loaners that charge a certain sum annually, in addition to the interest fee. Secondly, if you miss any repayment installments, you are probably going to have to pay late payment fees. Finally, look into the possibility of a change in tenure fee. More flexible loaners offer you the possibility to lower your monthly installments if you prove to be reliable enough.
4. Dependability of the loaner
Always make sure to do your research on the credibility of your loaner, you don’t want to end up in a situation where you have to take another loan because the previous one was a ripoff of any sort. So, check their credentials, look for reviews, and just overall – be vigilant with who to trust!
5. Plan the repaying thoroughly
Repaying is the most important part of getting a loan, and you must make sure that you have the means to do so properly. Plan everything out thoroughly, every installment, what you need to do to have the exact sum on time, all of that. It would be best if you were to plan all your monthly spendings in regard to the loan repayment installments, as it will help you to ensure that everything goes according to plan.
6. Consider the impact on your credit score
Finally, all of us understand the overall importance of a good credit score and how it relates to bank privileges. That being said, knowing how your credit score can possibly be impacted by a personal loan is also important. If you repay your installments on time and borrow a reasonable amount of money – it will increase. On the other hand, if you don’t there is a high probability that your credit score will be negatively impacted.
Finally, the most important takeaway out of all the factors that you’ve read about is that the key to getting a good deal with your first personal loan is to take the time to do your research. It sounds simple, but it truly will give you an edge when it comes to what you get out of the personal loan in question. Reading through all the information on this topic might sound menial and boring, but it is imperative. Ultimately, if you ever need another personal loan, you will be ready to do so with way less research than this first time. So, start doing your research, be thorough, and good luck!