Personal Loan

Your car breaks down. Your aging washing machine sputters to a stop. Your fridge hums its final note. Your parent refuses to give you that extra little bit you’ll need for next year’s rent at college. That gap between your child’s front teeth shows no signs of closing, and your family dentist says it’s ortho time. These are all situations where you might find yourself needing to shell out more cash than you actually have. That’s when it’s time to consider a personal loan.

Personal loans are a growing trend throughout the nation. In the past, banks have urged customers to use credit cards. However, credit cards are short term loans with high interest rates, and not necessarily the best option for many customers out there. They are also costly over the long run. Most consumers fall into the trap of paying only the minimum amount on a credit card, allowing years of debt to build up and, in the end, paying much more for the product or service that they bought on credit than it’s actually worth. Plus, it’s difficult to calculate the total you’ll actually owe on a good or service, then set up and stick to a repayment schedule.

If you decide a personal loan is a good option for you, shop around. There are all kinds of personal loan comparison sites out there. You need to look at interest rates to decide which personal loan is most realistic for you. Many financial experts recommend approaching financial institutions, like banks and credit unions, first. Their rates tend to be lower than, say, payday lenders.

With so many types of personal loans out there, it’s difficult to say what kinds of interest rates you can expect to find (that’s why it’s so important to do your own homework)! However, recent statistics from the Federal Reserve reveal that terms on two-year bank personal loans average above 11.8 percent. Credit unions often offer better rates. A lot of credit unions will also make very short term unsecured loans for $500 or less.

When shopping around for a personal loan that works for you, keep the following in mind:

  • Check the total cost of the credit. Lower monthly payments might not be the best deal in the long run.
  • Watch out for hidden fees, like credit insurance and buying clubs.
  • Ask the lender to clarify any extra fees or charges that you don’t understand.
  • Go on what’s in writing, not what the lender actually says. When it comes to personal loans, only the written word has any weight. If there is a discrepancy between the written contract and the lender’s verbal explanation, look elsewhere for your personal loan. Discrepancies are a sure sign of a dodgy deal.