The term personal loan is a very broad financial term that basically means that the money lent can be used for any purpose. Unlike a car loan that is used specifically to buy a car, or a student loan that is used to pay for college, a personal loan can be used in many different ways. Some of the more common terms that fall under the umbrella of personal loans include debt consolidation loans and payday loans. Since the term can include a wide array of different types of loans, you need to consider many factors to help you find the personal loan that is ideal for your needs. Read on to learn more about some of those factors.
The Interest Rate
One of the most important factors that you need to consider when you are taking out personal loans is the interest rate. Personal loans have a huge range when it comes to interest rates. Individuals who have great credit and are taking out a personal loan from a credit union may find that they have single-digit interest rates, while individuals who are taking out loans from payday companies may pay up to a 400 percent annual interest rate. Carefully consider the interest rate and if it is affordable.
If the Loan Is Secured or Unsecured
Another important factor to consider is whether the personal loan is a secured or an unsecured loan. Secured personal loans are typically secured using your car title as collateral, but they may also use post-dated checks, jewelry, or gold as collateral. If no collateral is required, you are dealing with an unsecured loan. If you select a secured loan and you default on your payments, the collateral you post can be possessed by the lender and sold to pay your outstanding debt.
If the Lender Reports the Loan to Credit Agencies
If you are looking to take out personal loans, consider whether the lender reports the loan to credit agencies. Finding a company that reports the loan and your payments can be ideal if you are looking to build up your credit. Not every lending agency reports the loan and payments to credit agencies, so always consider this factor.
How the Loan is Repaid
Lastly, consider how the loan is repaid. Is the money taken directly out of your bank account or pulled from your debit card? Do you have to go into an office and make a payment in person each week or month? Personal loans can be paid back in a variety of ways, so consider how the loan is repaid and if that is convenient for you.
Personal loans can be given out by many different lenders, including banks, credit unions, payday loan companies, and online lending institutions. Taking the time to consider the interest rate of the loan, whether the loan is secured or unsecured, if the lender reports the loan on your credit report, and how the loan is repaid will allow you to find and secure the ideal personal loan for your needs. To learn more about this subject, contact a company such as Ardmore Finance.
When I started my own company, I knew that I needed a little business capital and fast. In an effort to raise money, I worked with various lenders to discuss loans, financing, and special terms. Unfortunately, I quickly discovered that not every loan was created equally. Some loans had almost predatory terms like high interest rates and penalties, while others were completely fair. Fortunately, a business consultant of mine taught me about loans and financing, so that I could make better choices in the future. The information on this blog saved my business, and I know that it can help yours too.