3 Things to Consider When Seeking a Personal Loan
Often when faced with the many events life throws our way, whether it be an automobile accident or much-needed home renovation, we find ourselves in dire need of money. If you're considering a personal loan as the solution to your financial needs there are three things to keep in mind before settling and signing your name on that agreement.
Secured vs. Unsecured Loans
Will you be looking into receiving a secured loan or was an unsecured option more beneficial to your situation? The former relies on putting collateral against your loan amount, it can be something like a vehicle, home, or other item containing significant monetary value depending upon the loan amount. Though in the instance of the borrower defaulting on the loan, the listed collateral becomes forfeited to the lender.
While the latter requires no collateral and could be a better option for those who wish not to or are unable to provide an asset as collateral. Though unsecured loans often carry higher interest rates due to the higher risk posed to the lender.
What is Your Credit History?
It is essential that you know and understands your credit score before applying for a loan as your score may or may not allow you to access certain types of loans while affecting your interest rates. In the past, where it would have been very difficult to receive a personal loan for those with bad or no credit history, more and more companies exist willing to take on the higher risk borrowers. Though if you have good credit score you'll find securing a personal loan with a low-interest rate is much easier, it is still possible to find affordable options for those suffering from a less than perfect score.
From Where Will You Receive the Loan?
Personal loans come in a variety of circumstances and amounts from different lenders so it is better to determine what type of lender you'll be seeking. Each has their own unique advantages and disadvantages best suited for different types of borrowers. The two most widely used sources for personal loans are usually one's bank or credit union. Both offer significantly higher dollar amount loans and often with similar interest rates. Banks just often carry the distinction of being more accessible than the membership based credit unions. These types of lenders can be the preferred choice for borrowers seeking significant loans which can be taken out against the equity of a home. For those seeking smaller loans or in need of immediate resources, lenders offering cash advances may be the better of all available options. Loans for as much as $5,000 can be taken out often within the same day of application. The quick and available resource though does come with higher rates of interest than other sources and is usually settled within a month of lending.
Evaluating Your Individual Financial Requirement
From whatever available resource you seek a loan from it is best to fully consider all aspects of your own financial situation before moving forward.