By: Jodi Smith
Personal loans are unsecured forms of credit available to consumers for use in various circumstances. You can use them to pay bills, medical expenses, to make an investment, for leisure activities such as a vacation or honeymoon, for education, debt consolidation, home or car repairs; and the list goes on and on. While things are said to be getting better economically, there are still consumers who will need to take out a personal loan to secure their financial well-being. Here are some tips to better understanding how to know when your personal loan is a good fit:
Know Your Interest Rate
Interest rates are what could decipher a good loan from a bad one, and if you do your research, you can make a good decision about your personal loan, and perhaps even save money in the long run. Remember, there are tons of companies out there that want to loan you money, because that is their business. Shop around until you find a credible company that you can trust. It is easy to take out a personal loan, with a simple application process and usually immediate funding (sometimes as soon as the next day), so don’t fall for some fast loan company that will drown you in high interest rates.
Fixed Rates and Fixed Payments
To ensure that you are making a good decision on a personal loan, you should look at fixed rate and fixed payment loans. Life can be unpredictable, and so can interest rates, but they’re something you can control. Make sure you know exactly how much your payments will be every month so that you are able to budget accordingly. Many banks want your business, and are therefore offering lower fixed rates.
By using a personal loan to consolidate your debts, you can move further and further away from high interest rates. If you are borrowing to get out of credit card debt, it will substantially lower the amount of interest that you will end up paying after everything is settled. Some companies or financial institutions actually give the option of changing the terms of your loan after a certain length of time, enabling you to reduce interest costs.
[Free Resource: Check your free credit report and score]Improve Your Credit Score
By having a personal loan through a bank or credit reporting institution, you can actually improve your credit score. If you use the loan to consolidate high interest credit card debt, you are reducing the amount of your lines of credit while making on time payments to just one open account, therefore improving your credit score.
Low Loan Amounts
Remember, when considering a personal loan, it is important only to borrow what you need. A good investment is one that you can feel good about, and part of that is not paying interest on money that you didn’t need to borrow in the first place. Many financial institutions offer short term loans for lower amounts. It is important to avoid payday loan companies in this situation, and go with a personal bank loan.
After you have researched companies and have all of the numbers, you will know for sure if your personal loan is a good one. Personal loans can be very beneficial for consumers, but they can also be a rip off if you get mixed up with the wrong company. Be sure to get all the facts before signing up for anything. Once you get the money and are stuck with a company, you are stuck with them for a while, so make sure your personal loan is a good fit first and don’t jump the gun on this one.
This article was written by Jodi Smith of PersonalLoans.org, a site dedicated to informing consumers about the financial option of personal loans. Jodi has been writing for PersonalLoans.org for the past year and has been working as a financial adviser for 7 years.