Personal loans can be a very useful financial tool. They can be used to pay for almost anything, ranging from home improvements to school costs and everything in between. These loans are often used to pay down and consolidate higher interest debts and are a great way to deal with credit card debt. Often the interest rates on a personal loan will be lower than those for credit cards. While these loans can be useful, there are a few things to know before taking one out. Here are three things to keep in mind.
How They Work
The first thing that you will want to look into when it comes to personal loans is how they work. Personal loans are unsecured, meaning they are not backed by collateral such as your house or car. They are also installment loans in that you pay a certain amount each month over a designated amount of time after receiving the lump sum of the loan. Interest rates for these loans are typically fixed. With this type of loan the repayment terms are usually between two and five years.
Your Credit Matters
If you are considering taking out a personal loan, it's important to note that your credit matters. The higher your credit score, the more reliable a personal loan lender will consider you to be. Higher scores typically mean better terms and interest rates for personal loans. If your credit is less than ideal, you may find that the interest rate on a personal loan is too high. Some lenders will loan to those who have credit scores as low as 525. However, it may be best to take steps to increase your credit score before taking out this type of loan.
Interest Rates Vary
Interest rates are very important if you are thinking about personal loans. You want to make sure that your loan is affordable and that it is the best type of loan for your needs. Interest rates on personal loans range anywhere from 5 to 36 percent. Rates will vary depending on your credit score and other factors. You may also have to pay origination fees with this type of loan. These fees typically range from 1 to 8 percent of the value of the loan.
If you are thinking about taking out a personal loan, there are a few things to keep in mind. First, knowing how these loans work is key to determining whether or not they are the right option for your needs. Your credit score matters for these loans, the better your score the more likely you will find a personal loan with favorable terms. Interest rates for this type of loan can vary significantly from lender to lender and depending on your financial situation.Share
7 September 2019
I always wanted to buy my own home and after saving enough money for a down payment, I decided that it was time. Before I started looking at houses, I talked with a loan officer about financing. I wanted to know how much money I could borrow so I could look at houses in that price range. I was very happy after my meeting at the loan company and I was ready to start house hunting. My name is Jarod Spangler and I'm now a homeowner. If you have the dream of owning your own home, I think you'll find my blog of help to you. I've documented my journey of saving money, securing a loan and purchasing a house. To help you become a homeowner too, I'm offering advice and tips of things that I've learned along the way.