Personal loans can be used for a variety of things from debt consolidation to home improvement. If you have never had a personal loan before, the process of getting one can be intimidating. You will want to find out everything that you can before you apply for a personal loan.
You need to make sure that you research to find a lender that is reputable and who will not take advantage of you. You could try to check this link forbrukslån.no/privatlån to see what options you have. You can also check the Better Business Bureau and online reviews before you choose the lender. You want to make sure that you will not be taken advantage of.
This article will try to help the person that is new to personal loans. Hopefully, you will get a little information that can help you out. Remember, you will still need to do more research before you sign on the dotted line.
How Do Personal Loans Work?
Personal loans are a type of loan that you pay off in installments. The lender typically will lend you from around $1,500 up to $100,000 and then you are expected to pay the loan back monthly. You generally have up to 84 months to pay of these loans, although smaller loans may have to be paid back in less time.
You need to think carefully about what you want the money for before you apply, since there are different types of loans that you can apply for. You also need to think about how healthy your credit is before you apply. Many lenders will not loan money to those with bad credit, and if they do, it is at a much higher interest rate.
Types of Personal Loans
There are a couple of different types of personal loans, secured and unsecured.
Secured Loans – This type of loan needs some sort of collateral for you to use the money. This is most often a vehicle or a home. If you fail to pay your loan in full, the lender will take your home or vehicle. You want to make sure that you pay on time, and you pay in full.
Unsecured Loans – These types of loans do not require any security or collateral. These loans are usually given to people who have outstanding credit health and who have shown a pattern of paying loans of on time and in full. If you fail to pay this type of loan, the lender will not be able to take anything, but they can ruin your credit if you do not pay the loan of in full.
Where Can You Get a Personal Loan?
There are many lenders that you can go to in order to get a personal loan. You will need to do research to find a reputable lender and read those online reviews. You can also check the Better Business Bureau to see what kind of ratings the lender has.
You can go to banks, credit unions, online lenders, or peer-to-peer lenders. Most people know what banks are trustworthy because they have national brand names. Some smaller hometown banks may be just as trustworthy, but you will need to check their reviews and BBB status: https://www.bbb.org/. The BBB will always be able to help you to find the reputable businesses.
Credit unions are usually more local than banks but are just as likely to lend you money for a personal loan. Do your research to find the credit union that will work best for you. Some credit unions only serve a certain population, such as aircraft workers or teachers.
Personal Loans Vs. Other Lending Options
Personal loans are one way of getting that emergency cash, but there are other options. One such option if you have outstanding credit is a 0% interest credit card. This type of card can save you interest fees if you pay off your balance each month before the due date. This is not the best option for someone with a bad credit history or someone that makes late payments on a regular basis.
If you own a home, you might also get lines of credit from your home equity or just get a home equity loan. You must be careful with these types of loans because your home is the collateral, and you will lose your home if you do not pay on time and in full.
Impact on Credit Scores
The first thing a lender will do when you apply for a personal loan is pull your credit. This means that they will contact one or more of the credit bureaus and check your credit. This is called a hard inquiry and it can impact your credit scores for up to two years. Some banks just check your credit score and nothing else and this is called a soft inquiry. This does not affect your credit score at all, so see if you can find lenders that will do soft inquiries.
Interest Rates and Other Fees
There are many fees that are involved in getting a personal loan. There are interest fees, origination fees, and prepayment penalties as just a few of the fees that you may deal with.
Interest rates – These rates are normally from 5% if your credit history is really good to around 36% if your credit history is not as good.
Origination Fees – Not all lenders will charge this fee, but those that do will normally charge between 1% and 6% of the amount of your loan.
Prepayment Penalties – Again, not all lenders will charge this fee, but some do. You need to read the fine print in your loan papers. Lenders charge this fee because they miss out on some of the interest money if you pay your loan off early.
This is just a little information about personal loans, you will want to do more research to find out more information. Be sure to ask around to see what lenders other people have used and their experiences with those lenders. You can also read online reviews and check out the BBB to find out who the reputable lenders are.