Personal loans help one make individual purchases or settle some outstanding bills or meet other expenses. The purpose to which you intend to put the loan is a critical factor since it determines the type of loan to choose. This is because some loans have high interest rates and short repayment periods; thus, you cannot depend on them to fund a long term project. However, you may have an urgent need that may not wait until the payday, so you go for such loans. Such kind of credit products help to sort out very pressing financial needs.
Below are some of the factors to consider when deciding on personal loan products:
Interest Rate
Top on the list of things to consider when taking a personal is the interest rate. When factored together with the repayment period, it determines the total interest that you will eventually pay for your loan. It is prudent always to ask yourself how you can lower the interest rate as much as possible.
The critical determinants of the percentage at which you are loaned some money are your risk profile and the lender you opt for. If you are deemed a high-risk borrower due to a high chance of defaulting, you will be charged a higher percentage. And you can find the rate differs from one lender to another. To lower your interest rate, you need to build a good credit score and look for better lenders.
Repayment Period
While a credit product with a more extended repayment period seems better due to the less pressure of paying small amounts, you will end up paying much more interest and other fees. You are better off going for a personal loan that you can settle in the shortest time possible.
Here is the thing- look for a product that you will pay in a few installments, and even if you have a little pressure, you will save a significant amount. But it would help if you didn’t overwhelm yourself or leave nothing for monthly bills, which could force you to look for more loans.
Other charges
Loans come with administration fees and other charges which, combined with the interest, make up the total cost of the loan. Some lenders not only charge abnormally higher administration charges but also have some hidden fees. As such, you should always compute the total cost of a loan before signing on the dotted lines and even inquire if there are other undisclosed charges. Some lenders offer low interest rates, but the additional costs are out of the roof. That way, you can be sure what you bargained for is what you get.
