Personal finance can be a confusing topic. So here we break down the 10 key things you need to know about personal loans before applying.
1. Online lenders are practical options to get a personal loan.
With the progress in cyber security and Internet banking technology, online lenders have become reliable sources for loans, and may have more favorable rates. While physical bank branches are still in the business of generating loans, they’re no longer the only option.
2. All personal loan offers are not the same.
Not every loan offer is the same. The personal loan industry is expanding, and that’s both good and bad for borrowers. It’s good because borrowers have more options to choose the right lender for their financial situation. It’s bad because more unreliable sources for loans can pop up too. Do your research, and make sure you’re working with a reputable lender. Consider all loan factors in your loan offer as well, paying close attention to whether a lender charges origination fees or closing costs, for example, or if there are pre-payment penalties or not.
3. You don’t need a perfect credit score to get a personal loan.
You don’t need a perfect credit score to secure a loan. People with various credit scores secure personal loans every day. A good credit score, however, could get you better rates because a good credit score can be an indication of your ability to pay back the loan.
4. You don’t need collateral to apply for, or receive, a personal loan.
Personal loans are primarily unsecured loans, which means they don’t require you to put up collateral, such as your home or automobile.
5. Personal loans come with comparably low interest rates.
Many potential borrowers incorrectly assume that personal loans come with high interest rates. The truth is personal loans can have relatively low interest rates. Most personal Loans offers have rates as low as 6.99% up to 24.99% APR.
6. Personal loans don’t always come with expensive fees.
A personal loan doesn’t always come with origination fees or closing costs. In fact, most personal loans have no origination fees or closing costs, while many other lenders do. With a personal loan from reputable banks, as long as you pay on time, there are no additional fees.
7. The approval process for personal loans can be quick.
It’s a good idea to gather all of the required information before beginning your personal loan application. Once you’ve submitted your application, the process often moves very quickly. You could get a decision and have the funds sent in as early as the next business day after acceptance.
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