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.
Check the qualification policy to make sure you qualify. Check that someone is available to answer any questions you may have. Lenders should not leave you wondering what the status of your application is. Although the price is important, customer service is also important. What if you are sent the wrong amount, or there is a billing issue? TCA Loans only deals with lenders that have a solid reputation.
What are your options if the unexpected happens and you can not pay off your loan? The best thing to do is to contact the lender as soon as you find out that you can not pay them (due to your employer changing paydays, or other reasons). It helps if you can provide documentation or contact (such as your boss, or payroll company), to verify your situation. Most lenders are flexible, and would rather get paid late, than not at all.
Being honest will help your situation. Some people think that exaggerating may help them (more extended time on the job than they have, higher income than they have, etc.) If a lender feels that you are exaggerating or lying, they will decline your request for a loan. This is because it takes too much time to find out the truth from you. If they see that you are honest, then they are more likely to approve your loan.
Once you get a loan, remember the following valuable tips:
Do not default on your loan. If you do not, this causes you all sorts of problems, like extra NSF fees from your bank if the payments bounce, and possible fees charged by the loan service. Also, the lender may send your account to a third party collections agency. This will also show negatively on your credit report and can cause problems for years.
Keep your NSF (non-sufficient funds) charges down in your checking account. If you have too many, it is also a red flag. Keeping the “red flags” to a minimum will result in a better approval rate for you.
Before you start your search for a loan, it’s important to understand the basics. Below are common questions and answers people have when they start looking at loans.
What is an APR?
Annual Percentage Rate or APR is the figure that represents the amount of interest a lender will charge you as a yearly percentage. Interest is the charge that you have to pay on borrowed amounts; it is a way of paying the lender for their services. Lenders are required to disclose APR by law. APR is charged at both fixed and variable rates. A fixed rate interest will not be affected by external changes and represents the stock annual percentage rate of the finance charge. Variable rate programs are affected by indexes (economic indicators) and will fluctuate accordingly, charged according to the prime rate and an added percentage. If you are applying for a variable rate credit card, then ask your credit card provider how they determine that rate and according to which index. There may well be limitations set on how much and how often a variable rate can change.
What is debt consolidation?
Debt consolidation is a way in which you can avoid bankruptcy and destroying your credit rating entirely. Companies that offer debt consolidation services will combine (or ‘consolidate’) your arrears into one lump sum. You will pay one monthly amount that the debt consolidators will then dispense variously to your creditors. Debt consolidation professionals will negotiate with creditors to help you get better repayment terms and lower interest rates. These companies aim to help you get out of debt faster than you would on your own and can help stop you going under completely.
What is a loan?
A loan is, on its most basic level, an arrangement between lender and borrower where the lender provides the borrower with money or property, and the borrower promises to return it at a later date, usually along with some interest. Loans comprise two parts- the amount borrowed and the interest. Interest represents the charge the lender imposes for the services they provide, it is also called APR and is expressed as an annual percentile of the total amount borrowed.
What is a student loan?
Student loans are a popular form of financial aid used by college students. As a college student, you can get hold of both subsidized and unsubsidized loans. Subsidized loans are funded in part by the Federal Government, and you will simply pay back the money you have borrowed, without any interest. Unsubsidized student loans work like any other borrowed finances, and you will have to pay back the interest on the loan in addition to the money originally borrowed. All student loans must be paid back in full regardless of whether or not the student graduates.
What is a payday loan?
A payday loan is a short-term loan that is deposited directly into your checking account, usually within 24 hours. At an agreed time the money that you have borrowed will be removed from your account in addition to the charge that the loans company imposes upon you. The service fee will be dependent upon the size of the loan and your credit history. For a further fee, you will usually be allowed to extend your loan. Payday loans are also often referred to as bridging loans and can be useful for those mid-month times when cash is tight, and you have bills to pay.
What is a personal loan?
A personal loan is a type of unsecured loan available to individuals. It is not guaranteed by any collateral, and for this reason, they usually have higher interest rates than other types of secured loans. Personal loans can be obtained for pretty much any purpose– you might want a personal loan to fund that holiday you’ve been dreaming of, to redecorate the house or just to cover unexpected bills.
What is a mortgage?
A mortgage is an amount of money borrowed from a bank or other lender for purchasing a property. The property is itself, used as security against the loan. When applying for a mortgage, you will agree to pay back your loan over a fixed period of years, usually in monthly installments.
What is a home equity loan?
A home equity loan, also commonly referred to as a second mortgage, is a popular form of financing where your home is put down as collateral and security for the loan. This means that your home is at risk if you do not keep up repayments, but can enable you to procure more favorable interest rates and also tax benefits. The interest accrued on a home equity loan is tax-deductible up to $100 000; other loans offer no such benefits. With a home equity loan, you will borrow a lump sum of money and agree to pay it back over a fixed term of years with either a fixed or variable interest rate. A second mortgage works in just the same way as a regular mortgage
What is an auto loan?
Auto loans are loans provided to purchase a vehicle. Often your car dealer will try and provide you with auto financing, but cheaper rates are far more likely to be found elsewhere. It is possible to be pre-approved for an auto loan before you even start looking for your car. Often this is the wisest way to act as you know all your options and spending limits right from the start.
What is a secured loan?
A secured loan is a loan requiring you to put up some type of collateral as security for the loan repayment. Most commonly this will be your property, and your home will be at risk if you fail to keep up repayments. As secured loans present lower risks to the lender, you will usually be rewarded with lower interest rates on secured loans.
What is an unsecured loan?
An unsecured loan is a sum of money that can be borrowed from any lender. Unsecured loans are not tied to anything, and for this reason, the interest rates charged on them are slightly higher. If you apply for an unsecured loan, then you will receive a sum of money which you will be required to repay, usually in monthly installments. Different lenders have different repayment options so check with your loan company about the choices they provide.
Obtaining a loan or any type of finance can be a real challenge. If you’re someone with a bad credit history and you are trying to get a secured loan or buy a house, you will usually have to do a bit more work to find a lender prepared to lend you the money. You will also have to pay a higher interest rate than someone with a clean credit history.
What Is Credit History?
Before you go looking for a loan, it is crucial that you know more about your credit record. This is a recording of all your past financial commitments and contains information about your repayment reliability and the total amount of debt you are carrying.
Your credit record is used by lenders to determine your creditworthiness. Lenders will assign you a credit score or rating. The higher your credit score is, the greater the chance you are of getting a loan with a low-interest rate.
How Did Your Credit History Go Bad?
Your credit history is a continuous record of information about you and your finances. If you’ve missed or made a late payment it is captured in the file. This is the same if you have ever defaulted on a debt or failed to fulfill a financial contract.
Everything is captured in this record, missed mortgage payments, repossession, bankruptcy, CCJs, IVAs, credit card defaults, etc.
Credit reporting agencies gather other information about you, such as employment changes and changes in your home address. If your credit record shows that you make such changes often this will also be revealed in your credit report.
Will You Ever Qualify For A Loan?
Generally speaking, you will still be able to get a secured loan or mortgage, but there might be certain restrictions on your borrowing. Because of today’s culture of debt, there is an ever number of increasing lenders who specialize in loans for people with bad credit. Just remember that with bad credit you will probably be charged a higher interest and possibly be limited in the amount you’re allowed to borrow.
The positive part of this is that once you have secured the loan you can start repairing your poor credit history by making regular, on-time payments. It will take a little time to improve your credit history, but it will happen.
What Type Of Loan Can You Get?
You have the option of going for a secured loan or unsecured loan. Unsecured loans usually have higher interest rates because you are not required to put up collateral as security for the loan. Because the lack of collateral makes the loan riskier for the lender, you should expect higher interest rates and more strict loan terms.
On the other hand, secured loans require you to provide collateral. Collateral can be a property you own. Usually, the loan is secured by your home. The amount you’re allowed to borrow and the interest rates you’re offered will be determined by your credit history, the total debt you have already, and the value of your home.
Different lenders weigh these items different ways, so be sure to check with several to find one with a product suited for you.
Where Do You Look For A Bad Credit Loan?
Before you take a loan, it’s wise to research a number of different lenders and brokers. Compare interest rates they offer you, any special loan terms they may require, and any other specifics about their loan process.
Generally, if you have an adverse credit history the best way to source a good loan is to use an online lender. Make sure that they are not tied to one lender but have access to a large panel, such as tcaloans.com.
There are a large number of both secured and unsecured loan lenders in the US, some are ethical others not so much, so make certain that you carefully review all details before making a final decision.
Do you have unpaid bills piling up? In a tight financial situation, you can’t seem to find a way out of? One solution you may not have considered is a consolidation loan. Consolidation loans combine all of your loan debts from multiple lenders into one bill or simple payment. Consolidation loans can also lower your interest rates, allowing you to pay off your debt sooner.
Factors in fees
Depending on the type of loan you choose, fees can vary from nothing to 5% of your loan amount. Refinancing a home mortgage and utilizing the equity to pay off bills is a popular solution but consider all fees, especially if consolidation loan rates you’re offered are only slightly lower.
Home equity loans and lines of credit can be utilized with little to no fees. Bill consolidation loan rates vary. Personal loans are a good option as well because their rates still beat many credit card interest rates.
Make rates pay
Before taking out a consolidation loan, ensure that your loan rate will be lower than that which you are currently paying. This may mean that you choose not to consolidate each of your loans. Such as student loans frequently have the lowest rates probable, better than mortgage rates.
If you can consolidate only a fraction of your debt, use the consolidation loan to pay off debts with the maximum interest rates.
Go short – on terms
Opting for a shorter term with your consolidation loan will save you money on interest. While smaller consolidation loan payments are alluring, the long-term interest payments can cost you more in the long term.
Searching online for consolidation loans allows you to compare offers, allowing you to find the best deals and ultimately saving you money. Many financing companies offer better loan rates online than in their predictable offices. Ask for quotes from lenders and review the terms, even a dissimilarity as small as an eighth of a percent can financially create a significant change in savings.
Many people have multiple loans running concurrently. Sometimes, it may become difficult to manage the loans and make all the payments on time. Direct loan consolidation is a method to manage these loan amounts in a prearranged fashion. The borrower can combine and pay one fixed rate of interest on the total amount owed on all loans.
The interest rate on a direct loan consolidation loan is based on the regular interest rates on the loans being consolidated. This rate is then rounded to the next uppermost one-eighth of one percent. Direct loan consolidation rates must not surpass 8.25 percent, and it is a fix that remains the same for the entirety of the life of the loan.
If an individual is nearing the final payments of the loan, it may not be gainful to consolidate. Consolidation is favorable depending on the new terms of an obtainable loan compared to the original terms presented. The factors to consider are monthly payment amounts and erratic or fixed interest rates. Consulting with a loan advisor is sensible.
Oftentimes, websites offer online calculators to match up to consolidation rates with available rates. Direct loan consolidation can be an excellent method to check if accessible lenders are willing to provide any improved rates before choosing for consolidation.
The borrower should also inspect the eligibility alternatives. The main advantages of direct loan consolidation are that a borrower can potentially find lower rates, flexible refund alternatives and decreased monthly payments. A borrower can also keep hold of any financial support existing on the old loans.
Choosing to take out an unsecured loan will invariably take priority over taking out a secured one. The higher rates of interest added onto unsecured loans tend to be more attractive to borrowers compared to the knowledge that their house might be pulled out from under them in the case that they forget or are unable to make payments, which is the case with secured loans.
Credit seekers often apply for loans with every intention to pay back that loan. In the event that you forget to carry such out, however, discovering how tremendous the conceivable repercussion might be enough to change your mind about taking out that loan.
One example is a man who wants to open a new branch of his business but has inadequate capital to achieve this. If you were a negative thinker, you’d probably focus incessantly on the possibility of becoming repossessed. You’ll undoubtedly decide not to go through with the loan. You won’t manage to go through with your projected development. Just think how much potential income you’ll presumably get if you decide to take an unsecured business loan; the repayment would not have been an issue in any way.
The same principle applies to small business owners. Taking out an unsecured small business loan might have granted you the flexibility to grow your business. You’ll be able to get right on those expansion projects since unsecured loans are given rapid approval. This is because there are no collateral records that must be delved into.
Not all unsecured loans are used for businesses. It’s also possible to get an unsecured personal loan if you need to make renovations on your property, to purchase a vehicle, or if you want to consolidate your existing debt into a single long-term loan that is more workable for you to pay-off. The length of your loan repayment will be based on your ability to pay; you may select from half a year to ten years. Some lending agencies even permit as much as 25 years. The interest on your loan proportionately increases while the loan term extends but the monthly amortization is less expensive so payment results in being more feasible. Your capability to pay stands out as the basis for choosing the length of time the loan repayment will be.
A debt consolidation loan enables you to borrow money to pay off your current debts. It differs from debt management, which is where you negotiate affordable repayment terms with the companies you owe money to.
The benefits of debt consolidation loans
A debt consolidation loan can help you move all your debts onto the one loan, thereby reducing your monthly payments to a more manageable level. If you are able to repay your loan in a timely manner, it will also positively impact your credit rating, and if you are incurring high-interest rates on your existing debts, it will help you to reduce the amount of interest you pay.
The two main types of debt consolidation loans
There are two main types of debt consolidation loan: secured and unsecured. A secured loan requires you to secure your loan against property. This means that if you fail to repay your loan, your lender will be able to sell your property to recoup your outstanding debts. If you have a previous history of bad credit or have several large debts to your name, a lender may only consider offering you a secured loan.
An unsecured loan is less risky than a secured loan, as it does not require you to secure your loan against your property. However, you may only be able to acquire an unsecured loan if you have a history of managing your finances responsibly. If you find yourself in a situation where you are struggling with your finances and you fail to keep up with your unsecured loan repayments, your lender will not be able to sell your property. However, your lender may put a black mark on your credit rating, which may make it more difficult for you to acquire affordable lines of credit in the near future.
The cost of debt consolidation loans
A secured loan is usually cheaper than an unsecured loan, as your lender will be able to sell your property if you do not pay the money back. Since you will pose less of a risk to your lender, you will be able to secure a lower interest rate on your loan.
Whether you wish to take out a secured or unsecured loan, you will find a wide range of loans available for the taking.