The versatility of personal loans makes them attractive to consumers in need of extra funds. Personal loans can be used for helping consolidate debt, to renovate or remodel your home, financing travel, or anything you desire. Whatever you need the financial help of a personal loan for, you can’t afford to make mistakes when choosing the best personal loan for your needs. Mistakes could hurt your finances for years to come.
To get the best personal loan for your circumstance and to keep your finances healthy, avoid these mistakes:
1. Failing to compare options
Don’t settle for the first personal loan offer you receive. Interest rates, fees, and terms can vary immensely between lenders. In addition to checking with your bank or credit union, check with online lenders for offers. Competition between online lenders is stiff, so many will offer you lower rates than you’ll find with your bank or credit union.
2. Overlooking fees
Many borrowers are looking at the loan rates when comparing loan offers. Borrowers who overlook the fees and costs of each loan may end up paying far more than expected. Many lenders charge an origination fee. The origination fee is typically calculated as a percentage of the amount borrowed, usually 0.5%-2%.
3. Lying on the application
Not only is lying on your application illegal, but it can also hurt your chances of getting approved for a loan. Not all lenders check all details of your application so a lie may not be noticed, but if a lender realizes you gave inaccurate information, they can deny the loan. If the loan has already been issued and the lender realizes you lied, they can consider the loan a default and immediately ask for repayment. Be honest with lenders.
4. Skipping over the fine print
Before signing a loan agreement, lenders should always review ALL of the contract. Reviewing allows you to notice things like fees or terms that may differ from your first offer. Be on the lookout for hidden details because they can be proof of the lender being a predatory lender.
5. Not changing spending
If you’re borrowing a personal loan to consolidate debts or because you’ve mismanaged your money, you risk ending up in a worse financial situation if you borrow a loan and don’t adjust your habits. Before taking out a loan, borrowers should revaluate spending. Adjust your budget to avoid being in even more debt after you take out a loan.