In the past, getting a personal loan could be a difficult process, requiring multiple steps, lots of paperwork and at least one visit to the lender’s office. The internet has changed this process, making what was once a complicated process into a relatively simple one. With the ability to apply for an online loan and get a decision almost instantaneously, it is faster and easier than ever before to obtain a personal loan. But just because you get a personal loan does not mean that you should. Read on to learn what you need to know before applying for an online loan.
Before Your Apply for an Online Loan
First, figure out how much you can actually afford to borrow. Personal loans can be used for just about anything, from home improvements to medical expenses to debt consolidation. If you need to borrow money, the key is to only take out an amount that you can realistically repay. This can be determined using online loan calculators, where you input the amount you plan to borrow, the interest rate that you will likely have, and the length of the loan. Based on this information, the loan calculator will tell you how much your monthly payment will be. If the amount is something that you can afford on top of your other expenses, such as rent and car payments, then you can probably afford to borrow that amount. Use the loan calculator to figure out how different interest rates and loan terms will affect your monthly payment; you may find that by decreasing the length of the loan, you will save a substantial amount of money over time. If the monthly payment is higher than you can comfortably afford, then consider borrowing a smaller amount or, if possible, not taking out the loan until you can afford to make those payments.
Consider Your Credit Score
Second, take a look at your credit rating, which may also be called your FICO score. This number is an indication of how trustworthy you are as a borrower. The higher the number is, the lower your interest rate will likely be. Anytime you take out a loan or request credit, the lender will check your credit rating to be sure that you are a good risk and that you are likely to pay them back. Knowing your credit rating is an important step in determining whether or not it is a good idea to borrow money. While you can still be approved for a personal loan with bad credit, you may end up paying a much higher interest rate. If that is the case, you may want to hold off on getting a loan until you can improve your credit rating. You also may consider taking out a small personal loan to help build or improve your credit. With regular, on-time payments, you can increase your overall credit rating and get a better interest rate in the future.
Understand Your Loan Terms
Third, carefully examine the terms of any loan before agreeing to it to make sure you understand your loan terms. This includes both knowing and understanding any fees, interest rates and other charges that may make the loan much more expensive than you originally anticipated. Start by looking up the prevailing interest rate, so that you can compare lenders and determine if you can potentially get a better deal. Examine the annual percentage rate (APR) of different loans, which can help you understand how much it will truly cost to borrow money. Check to see if the loan is fixed rate or adjustable rate, which can impact the amount of money you have to pay back. Read the loan terms carefully to see if this loan is a smart financial choice.
Before applying for an online or traditional loan, a smart borrower will take the time to understand each of these three items. If you believe that a personal loan is the right choice for you, contact us or apply online via our website today!