Personal loans are a popular option for those seeking financial assistance or the means to increase their spending power. The number of personal loans expected to be taken out this fiscal year continues to grow. Lacking insight or awareness regarding the most common mistakes made when applying for a personal loan can be very costly. Four crucial facts can ensure that loan applicants are able to navigate their financial options with greater ease and success.
One: Online Loans are Growing in Popularity
Online personal loans offer a more convenient way to apply for a loan. Being able to obtain financial assistance through an online application and approval process has made personal loans a popular alternative for consumers who wish to avoid using their credit card. Applying for loans online ensures that consumers are provided with a wider range of options and lenders to choose among.
Two: High-Interest Rate Loans May Lead to Greater Debt
Fast cash and payday loans often involve higher interest rates that can make repayment difficult. The wrong personal loan may lead to more serious financial issues than many applicants might realize. Being unable to identify predatory lending practices or find personal loans that can be repaid more easily has resulted in considerable debt for many applicants who lacking insight into their options. Loans that involve fees, hidden penalties or come with too high an interest rate should be avoided.
Three: Comparing TAR and APR
Confusion regarding the total repayment rate (TAR) and annual percentage rate (APR) can make comparing different financial options far more difficult.
Annual percentage rate is the standard method used to compare loans. APR may be manipulated by lenders and certain loan contracts may lead to APR increases over time.
Total amount repayable includes the principle amount of the loan as well as all interest payments and potential fees. TAR is often a far more accurate way to calculate the true cost of a loan.
Different loan contracts can vary considerably with regards to terms and conditions. Failing to read the fine print or lacking the knowledge and understanding needed to accurately compare different contracts and financial options can become a very serious liability.
Four: Avoid Gimmicks
Many lenders utilize special promotional rates and free products to entice applicants to take out a loan. Cash-back incentives, payment holidays and other gimmicks lead many applicants to take out personal loan they may not need or have difficulty repaying. While promotional opportunity can occasionally be of benefit, loans should always be considered based on their terms and repayment structure.
Comparing Options is Always a Smart Move
Comparing many different lenders and shopping around in an effort to find better rates and terms is always worth the extra time and effort. Finding a loan that can may provide less long-term financial stress ensures that consumers are able to enjoy greater flexibility without an increased risk of incurring unnecessary debt. Shopping around for the right lender or terms can make a world of difference when applying for personal loans.