Personal loans can often be a great option to lend a helping hand in times of need, but they aren’t your only option. It is worth noting that sometimes things such as a home equity loan, or using your credit card in certain instances may in fact be the better option when it comes to interest rates. However, this may not always be the case, or even applicable to all people in all situations. It really depends on a case by case basis, and even though personal loans may not be perceived as the best option in every instance, they are certainly far from being the worst. The worst would be things like having to resort to borrowing from your 401k if applicable, getting a payday loan, etc. While a personal loan can have a higher than “normal” interest rate, it is going to be nowhere near as high as the payday loan, and you aren’t borrowing from your retirement. Those two points alone are major pluses when it comes to considering this type of loan.
What You Should Know Before Applying for a Personal Loan
Bad debt is heck on this type of loan. Since lenders already look at this as a more risky type of loan because there is no collateral involved, it is to your benefit to have your financial house in as much order as possible to avoid sending up any unnecessary red flags. As with any kind of loan, it is important to know not only what you are getting into regarding the total cost of the loan, the repayment schedule, monthly payments, etc. but also what your credit report is saying about you. You have the right to a free copy of your report once per year, and you should obtain this and check it over carefully to be sure everything is correct. You can get a copy by requesting one from Experian, Equifax, or TransUnion. This will enable you to see what lenders are seeing, and give you the ability to correct any mistakes before the wrong impression is made.
Another thing you should do to level the playing field is to make sure that you are caught up on all of your bills. These two steps alone can make a huge difference in your favor when it comes to applying for personal loans. Remember, lenders are called lenders for a reason, because they want to make loans and forge new business relationships, while making a little money in the process. Knowing the facts about loans, as well as doing some smart shopping for the right loan, can mean the difference between whether your deal is sweet, or sour.