Do You Need A Personal Loan?
Are you in the market for a small personal loan? First, let’s define a personal loan. A personal loan is usually anywhere from $500 - $5000 dollars. You have your financial aid so your tuition, books, room and board are already paid for. What do you need a personal loan for?
The car broke down again. You know that new transmission will probably cost upwards of $1,000.00. You also know your financial aid money is not for fixing your car so you do need a personal loan. After all, you need that vehicle so you can get to that part time job clear on the other side of town.
I am sure you have thought about were you are going to get this personal loan. You can always start with the internet. Simply using the search for “personal loans” will get you so much information you will not want to look at it all.
Another good place to look is a local credit union or bank. You will probably find a credit union will be more open to a small personal loan than a larger financial institution would be. A bank may just want to put you in a product that is really not what you are looking for, such as a credit card. First of all the credit card is going to have much higher interest rates than a personal loan. So keep that in mind.
Terms and interest rates can vary considerably, so it is best for you to shop around and check out all the competition. My suggestion is to stay with a credit union or bank. Be aware of the payday lenders. There interest rate will be considerably higher than anything else you can do. They tend to turn into a circle. What you borrow you have to pay back the full amount plus interest. You end up using them over and over. There making a large profit off you.
If you talk about the terms when interviewing a bank or credit union, you will probably find that a credit union can usually do better on the rate than a bank can. They usually will have less abusive terms as well.
If you are looking for a personal loan, here is a quick tip list:
1. Look at the total cost of the credit — not just the monthly payments, a lower monthly payment is not always better.
2. Look for hidden charges. Study all the associated fees. Things to look for: credit insurance, buying clubs and any other extra fees. If you do not understand it, have the loan officer explain the charge.
3. And finally, if what you are being told by the loan officer is different from what is in your contract — walk. Once you sign, promises from a loan officer, who may or may not be working at the institution next week, are meaningless. What counts is what is in writing.
And when it comes to personal loans, bigger is not always better.
Sometimes, loan officers will try to talk borrowers into taking a little more money than they had originally planned. That may be because the officer gets a commission based on the loan amount (more likely at a finance company) or because state regulations are looser for larger loans.
In addition, some institutions may handle unsecured loans by offering credit cards. But credit cards are a different situation entirely for borrowers. Often, rates are not fixed and may change during the course of the loan. And credit cards are revolving credit, meaning the borrower and lender do not set a fixed period to pay them off.
While that may sound like a great deal initially, it could be a lousy deal year’s later if you end up carrying a balance at 21 percent. Instead, opt for a specific personal loan amount with fixed monthly payments and a finite repayment schedule.
And learn from the experience. This might be the perfect time to sock away some money for the next rainy day.
