A personal loan can be used for a variety of reasons, such as to pay for a funeral or wedding, cover home improvement expenses, consolidate credit card debt, or pay for something else entirely. While personal loans can be truly beneficial for some people, they are not right for all individuals. If you are considering speaking to a bank about taking out a personal loan, keep reading to learn a few dos and don'ts.
Do Check Out Your Credit Reports
Your credit history and score play a huge role in the interest rate that you get on your personal loan. Credit is used by banks as a barometer for individual risk. Ultimately, you are much more likely to pay your loan if you have made your payments on time in the past. So, with that being said, the higher your credit score, the lower your interest rate.
Therefore, before applying for a personal loan, you will want to pull your credit report, which can be done for free. If there are any errors, make sure to dispute them immediately, as they can have a negative impact on your score.
Don't Accept the Very First Loan That's Offered
Before you actually commit to any personal loan, you will want to comparison shop between banks. You can take out a personal loan at community banks, credit unions, online banks, and a variety of other financial institutions. Therefore, make sure that you see where you can get the best rate.
Each institution will go through a different application process, which means they will weigh factors like credit and income differently. So, one bank might be leery about lending to you because you have recently been laid off from work, but another lender may be okay with it because of your excellent credit score/history.
Do Read the Fine Print
Once you receive a loan offer, it is imperative that you go through it very carefully. In fact, you may want to go over it two or three times. You do not want to miss anything in the contract, and you want to ensure you understand everything. Otherwise, you may find that you are paying surprise fees later down the road.
As you go over the terms of the loan, make sure to pay close attention to the APR (interest rate), repayment period, monthly payment amount, secured/unsecured, origination fee (upfront fee), and prepayment penalties.
For more information about personal loans, contact a bank in your area.
Share23 November 2020
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