5 Things to Know Before You Apply for a Personal Loan – What to KnowMar 19, 2020
There comes a point in your life when you find yourself “short” in cash. Whether you have a medical emergency or you need to pay for tuition fee, it could be stressful when you don’t know where to get urgent cash. One of the most effective ways to meet your financial obligations immediately is through personal loans.
The good thing about personal loans is that compared to other loans, such as car and home loans, they are easier to avail. If you’re looking to apply for a personal loan, here are some things to know:
Make Sure You’re Financially Ready for It
Personal loans are unsecured loans. That means that lenders take higher risks when they grant a personal loan to a lender because they don’t get anything in exchange for the loan. Therefore, personal loans tend to have higher interest rates and typically come with a short repayment period.
It’s crucial that you look into your financial ability to take out a personal loan. Is it something that you can pay for over a specific period? If it’s going to cause more problems for you, in the long run, it might be better to consider loan alternatives that will be easier for you to handle.
As mentioned, personal loans often have higher interest rates. When you’re decided to take out a personal loan, it’s essential to only loan the amount that you need. Taking on too much without any assurance that you can pay for it every month can put you in so much trouble and stress, therefore, loan responsibly.
Check Alternate Options
Banks and financial institutions are usually the ones people go to when they need urgent cash or a personal loan. However, they are the ones who carry high-interest rates. If you can’t handle the interest rates, it would be smart to check out alternative options, such as loans against fixed deposits or shares.
Use Personal Loans for Emergencies
As much as possible, don’t take out personal loans for non-emergency cases. Consider personal loans as an option when there’s a need for urgent cash. A lot of people take out personal loans to go on vacations or get a new gadget because of how easy it is to avail them. Don’t fall for the same thing because it’s likely that you’ll end up in debt that could possibly get out of hand.
Negotiate Interest Rates
Good credit history is considered desirable in the financial industry, especially if you’re taking out a personal loan. Use it to your advantage as well by negotiating interest rates with your lender. Keep in mind that banks are in competition among themselves, which is why they would be open to term negotiation when it’s brought up. A small reduction in your interest rate can have a significant impact on your repayment terms.
Personal loans are convenient for individuals who need urgent cash. However, it’s essential not to go overboard. Knowing these things will help you be more mindful and responsible when you take out a personal loan that ultimately will lead you to be financially-free once the storm passes.
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