If you are trying to purchase a big item on credit, pay medical expenses, plan a vacation, or consolidate debt, the easiest way might be to take out a personal loan. These loans can work for personal use with some limitations. They can be used to help cover costs for home repairs or renovations, pay for weddings, or cover personal costs.
When you start looking for a lender to take out a personal loan there are a lot of factors to consider. The search can feel overwhelming and stressful, but personal loans aren’t too hard to acquire once you understand what a personal loan is and what all the terms mean. If you need more information on personal loans and how they work, check out this article.
Personal loans should be taken out to assist with financial burdens instead of just adding to your personal debt. Before accepting a loan, make a plan to pay back the loan in a timely manner. These loans should be taken seriously and used for only necessary assistance. Taking on a loan of any kind should be a process that involves a lot of research and consideration.
Pre-Qualify
If possible, pre-qualify for loans with different lenders so you can get the most accurate rates and conditions of your loan options before you make a decision. When you pre-qualify, the lender will provide the rates you will most likely be offered on the condition you accept the loan. This amount is based on the information you give to the lender, so if your information isn’t current or correct, it could affect the terms of the loan you actually qualify for. The amount and terms of the loan are just an estimate based on the information supplied.
Pre-qualifying is not the same as getting pre-approved. Pre-approval is the firm offer a lender is willing to agree to after the lender verifies all the necessary documentation. The differences are important to understand when looking for a loan. For more information on the differences between pre-qualifying and pre-approval, check out www.investopedia.com/articles/basics/07/prequalified-approved.asp.
Compare Terms
Once you have pre-qualified, you can have a loose idea of the terms of the loans you will qualify for. Understanding the jargon can help make your decision-making process easier. Here are some important terms to understand before deciding on a loan and lender.
APR (annual percentage rate): This is the total cost of the loan per year. This will include any fees and the interest charged. The APR is going to show you the total percentage of the loan that the bank will charge for the whole year. To understand how much, you will be charged each month, just divide by 12.
Defaulting on a Loan: If the loan is defaulted, that means the loan payments have not been made. Usually, a lender will work with the borrower if the payment is a few days late. If a borrower does not try to make a payment, lenders will consider the loan in default and might send it to a collection agency which will affect the borrower’s credit score.
Principal: The original amount of the loan is called the principal. This does not include the interest accrued throughout the duration of the loan.
Amortization: This is the process of calculating how much or your monthly payment will go towards the principal loan amount and how much will go to the interest and fees.
Loan Origination Fee: This fee is charged by the lender to process and administer the loan. This is usually deducted from the loan amount.
Late Fee: This is the charge administered if the minimum payment is not met every month. If a payment is not met
Choose A Lender
Based on your research and information, you should have a good idea of what loan you are looking for. The first place you should look at is your current bank. If you are already banking in Atlanta, these banks offer both checking accounts and loans of all types. Choosing a loan from your current banking institution can make applying for and paying back the loan easier. Having a consistent bank for both your checking account and your loan makes the process easiest.
Make sure the lender you choose has a customer support team and resources. It can make the difference between having a good loan experience and a bad one. Make sure your lender can provide the type of support you will need during your loan duration.
Once you have acquired the loan, it is important to make the monthly payments on time to avoid adding unnecessary fees and costs to your total. Making smart choices throughout the duration of the loan will make the financial burden of a loan more manageable. Finding the right lender and loan can help make the process smooth.