When you apply for a personal loan, the financial decision will likely affect all your savings and spending patterns for some time to come. Therefore it makes sense to consider all the important factors in mind when you go for a personal loan. Whether you go for personal loans online or would like to take the route of a reputed bank, some market research must go into your decision.
But before the entire process starts sounding intimidating to you, let us assure you that the groundwork that goes into your research is easier than you would like to believe.
Interest rate
Let’s first talk about the elephant in the room. Whenever the need to apply personal loan arises, the single most burning question is which lender would guarantee you the best interest on personal loans? You may want to acquaint yourself with two terms – Applied Rate (AR) and Effective Interest Rate (EIR).
While EIR refers to the actual cost of borrowing if you make payments right on time. The method of calculating it keeps under consideration the gradual reduction in principal amount during the loan tenure. An Applied Rate or AR on the other hand assumes that the principal amount remains constant during the entire period.
Be prepared to pay additional fees
As a borrower it is only prudent to know that there would be certain fees or payments required when you apply for a personal loan; however you must beware of any hidden costs. Some of the common charges you should be ready to pay when you take a personal loan include – an annual fee that some banks levy in addition to the interest that you would be paying.
The annual fee is usually a fixed amount charged every year. Make no mistake about the fact that suppose you take a personal loan for a period of ten years, you would be paying the annual fee ten times. It can be very important information to have before you take the plunge.
You may also read: 5 Ways to Get Short Term Loans in UK
Late payment fees
Another factor to consider of course is the late payment fees. Now while all lenders whether banks, money lenders or online money lenders are bound to charge you late payment fees, it may help to choose a lender with not a hefty late payment fee clause or strict late payment policies.
Sometimes, in life despite your best plans to return the amount in a specified period of time, unlikely events may happen. It is best to be prepared for a bad day than to encounter it unprepared.
The Timeline
Certain needs in life are time-sensitive. Sometimes you do not have the luxury of waiting for a long time to get a personal loan approved. It is advised that while making the final decision do consider the total time it would take for you to get the loan approved. It may make sense to apply for personal loans online if time is a consideration for you.
From your end, you can work towards speeding up the process by keeping all your documentation ready and handy. It is common knowledge amongst money lenders that often small delays occur because the borrower may not be ready to furnish all the documents as soon as they are needed.
Lender Reliability
As taking a personal loan is an important financial decision it cannot be stressed enough that you do a thorough check on the reliability of the moneylender. One must not take this lightly as you will be sharing your often confidential information with them. Do not get worked up if the money lender or bank is taking time to check your credit history and is keeping a tab of your documentation.
Remember these good practices applied to research about their clients also reflect that they apply similar practices to their own dealings too- a plus point when trusting someone with a decision so important. A reputed brand with a known history of good and fair dealings is your best bet to consider. Also, make sure that the lender gives you complete transparency of their work. Any hidden information should be enough to raise red flags and steer clear.
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