If you are considering applying for a personal loan, then it is important to consider three different factors:
1/ The APR (Annual Percentage Rate) of the Loan
This is the aspect of the loan that is the most important. It determines how much money you will end up having to pay back, and can vary dramatically depending on the type of lender.
A loan needs to be viewed from the perspective that you will eventually have to pay the money back, and so you should really try to shop around as much as possible for the lowest interest rate before proceeding.
The lower the rate, the less you will pay. A Payday Loan for example could have an APR of thousands of percent, and a loan for a few hundred dollars could end up costing you thousands over the lifetime of the loan.
Avoid Payday Loans whenever possible. They make it easy to borrow money, but their rates of interest are crippling.
A simple rule of thumb to consider is that the easier it is made for you to take out a loan, the more crippling is likely to be the interest rate that is being charged. So, don’t be put off if your bank or potential lender makes you jump through a few more hoops to get a loan. It probably means that you are getting a better deal and that they are simply checking to make sure that you are a good risk.
2/ How Quickly Does the Loan need to be repaid?
It is also important to factor in how quickly any loan that you do take out will need to be repaid.
Even if a loan has a lower APR, this won’t necessarily do you any good if you need to repay the loan too fast.
So, you also need to look at the repayment period and see whether or not it is actually realistic for you to be able to pay back the loan over that period.
If it isn’t then you can either have a chat with your existing lender to change the period over which the loan needs to be repaid. Or you can find a new lender who will allow you to have the extended repayment period that you are seeking.
3/ Can you get the amount of money that you need?
Different lenders will also have different rules about how much money they will actually lend you. So it is important to check with a number of different loan companies about the particular rules that they apply before lending.
4/ Research different loan offers carefully
It is important when you are considering getting a loan to also factor in the time that it will take to research the offers. The fact is that most people assume that they will be able to find a good deal very quickly, when the reality is that it is a drawn out process and needs careful analysis and care before proceeding. It is all too easy to get caught up in the trap of thinking that you can very quickly find a deal that offers good value, when in actual fact you really do need to shop around to make it happen. This is what some unscrupulous companies count on, particularly payday loans companies, who draw you in with promises of quick money in the next 15 minutes. This is true, but you pay for that speed and convenience with crippling interest rates that can leave you trying to pay back the loan for years to come. So beware of “Quick!” and “Easy!” Offers.
It is a good idea to ask questions of your loan company about all of these four factors before you proceed with any loan.
This will ensure that you get the best possible deal on your personal loan.