A personal loan can be of great help when you are in need of money; however, it is quite expensive to borrow the cash. For that reason, you should ensure that you get nothing but the best deal when you decide to take one out. The following tips will assist you to find the best personal loan:
1.Always Check Credit Ratings
One of the most important thing in getting the best personal loan is your credit history or the credit rating. It should be very good. The decision as to whether you will receive the loan or not as well as the rate of interest to be charged on the loan depends largely on your credit history. If you are a high borrower and have a history of defaulting payments, it is more likely that your interest rate will be higher. These rates are specifically designed to loans for the bad credit borrowers. Therefore, to be eligible for a cheap personal loan, you need to check your credit rating before applying for the loan. By checking your credit rating before application, you are able to detect any mistakes that could affect your score. If your credit rating is very bad, you can take time to improve it through saving and continuous use of the account before applying for the loan.
2.Are You Really Need This Loan
Before applying for a loan, you should consider whether you really need one. Sometimes, it makes sense to get a loan but at other times, it does not. If you must apply for one, you should also consider an unsecured loan. For small amounts of money, taking a new credit card and acquire the loan through it is the better option.
There are many different lenders, hence the importance of comparing the different options available in the market before applying for a loan or a financial product. The different lenders have distinct charges. Look beyond the interest rate of your preferred loan, the quoted APR is also important and any other charges to know the total cost of the loan. The application criteria is also very important to ensure that you are eligible. This is because most lenders restricts their loans to only borrowers with a good credit rating.
4.Loyalty does not always pay
Going personally to the bank when taking a personal loan is the most obvious thing. The bank may know you as their customer but being a loyal customer does not guarantee a better deal. Loyalty does not pay in the finance world. Some lenders may offer more flexible repayments and lower APR to new customers hence the need to compare the different products available in the market and shop around before applying any financial product or loan.
5.If you can, avoid payday loans
If you need cash very quickly, a payday loan can be very tempting. This loan is offered manually and within a very short time. Persons with a bad credit history are also eligible for a payday loan, as the lender does not have time to go through your credit history. This is quite tempting when you are in need of quick cash but payday loans should always be avoided. This is because most payday loans have a very high interest rate ranging from 30 per cent to up to 50 per cent every month. This means that you may end up paying even more as interest rate than you had borrowed at the end of the agreed period. For this reason, they should be avoided as much as possible.
6.Check the penalties
Most borrowers do not usually check the penalties in case of defaulting as they assume that it cannot happen. However, it is as important as the above tips because you will be aware of what you will get into. Most credit card increase their rates in case of late payment for the remaining period while others charge a late fee, which varies depending on the size of the loan.
Late fees are as important as the interest rates so where two lenders tie in terms of their interest rates, go through their penalties to decide which the better one is. Always pick the lender whose penalties are more relaxed.