You might think that getting a personal loan is hard, but it doesn't have to be. Even though you have hundreds of options and often a confusing number of decisions to make before you make a formal application, it's easy to make sure you make the right choice at the right time and save time and money in the process. Before you choose the right loan for you, there are basically three steps you need to take:
First, decide what you want.
First, you need to decide what kind of personal loan will work best for you and your situation. For instance, if you own your own home, you can choose between a secured loan and an unsecured loan, depending on your needs. If you don't own your own home, you probably won't be able to get anything but an unsecured loan.
Secured loans are given to people who own property. Your home will be used as collateral for the money you borrow. So, if you don't pay back your loan, your lender can use your property to get their money back (s). Since you're putting up a guarantee, you'll usually get better (lower) interest rates on the money you borrow. On the other hand, you don't need to own property to get an unsecured loan because you don't have to back it up with anything. This lack of a guarantee does make the loan a little bit more expensive, and it may also limit how much you can borrow, though this depends on the lender.
If you don't own a home, this type of unsecured loan is usually your only option. However, many homeowners now prefer an unsecured loan to a secured one because they don't want to risk losing their home if something goes wrong in the future.
You'll also have to decide whether you want a loan with a fixed or a changing interest rate. If you get a fixed interest rate, your monthly payments will always be the same. With a variable rate, on the other hand, your payments could change if the interest rates that your loan is based on change at any time.
Step 2: Don't spend more than you can afford.
Most of the time, it's not hard to get money, and it's tempting to borrow more than you need just because you can. Because of this, it's very important to figure out how much you need to borrow and how much you can pay back on any loan. The most important thing to remember is that it's not up to the lender to figure out how much you can afford. That's your job. If you borrow more than you can afford to pay back, you can't blame your lender.
The easiest way to do this is to look at how much money you spend and owe each month and figure out how much money you have left over after you've paid your bills and bought what you need. This amount is pretty much what you can pay each month to pay off a loan. It's important to remember, though, that you should always leave a little bit of money for emergencies. This means that you shouldn't use all of your extra cash to pay off loans, but should also leave a little bit to cover you as you go.
Then, you can look at something like an online loans calculator to see if your extra cash and loan amount needs are a good match. You can use these tools to figure out how much your average payment might be or how much you can borrow based on how much you pay back.
Step 3: Look around to find the best deal.
Your average personal loan product may look exactly the same as the next one you look at, but that doesn't mean it will cost you the same. Interest rates can vary a lot from one company to the next, and if you don't shop around for the best rates, you could pay a lot more than you need to.
Most loans will all do the same thing and have the same terms and conditions. So, if you keep this in mind, paying a higher interest rate won't help you if there are no extra benefits. As always, the Internet is the best way to shop around these days. Even if you only spend a few minutes on a site that lets you compare loan rates, you'll see that the interest rates are very different. And remember that the interest rate you pay will affect how much you have to pay back each month. And the less you pay back each month, the less you'll pay back in total. All of this will save you money.
If you follow these three steps, you'll be well on your way to finding the best loan for you, and you'll make sure you save as much as possible with as little trouble as possible.
