Personal loan rates always have a higher rate of interest over loans that are used to purchase an item. The reason for this unfortunate fact is that there is nothing to secure the loan except for the signature of the signer. A bank has to take the customer’s word that they will repay. And the only thing that backs up the customer’s word is a FICO score. So it really is no surprise that a bank will charge higher personal loan rates to ensure that they get their money back in one form or another.
The first thing to do when looking for a personal loan is to investigate the current rates. No two lenders will have the same interest rates which is why it is a good idea to look around first. Do not rely on an Internet search alone. There are still local banks in existence that may not advertise their rates for various reasons. Even large banks in a region do not always put their information online as well. And do not ignore a credit union as a source for a personal loan. Certainly this is a lot of work to do for something that is relatively simple. It truly never hurts to do footwork in advance. The banking industry is extremely chaotic in this era of post-regulation and have no problem putting all kinds of catches on the money they lend. Why give them the satisfaction of gaining another sucker when it can be avoided with some research?
Interest is not the only item that can raise the cost of personal loan rates. Fees of all stripes can be attached at the time of signing, then be amortized into the monthly payments. This may seem unfair to the consumer, but he or she is truly at the mercy of the lender for this type of financial instrument. A bank needs to get the money they lent out in one form or another, and fees are one such way to do so. A borrower has no choice but to accept the terms. The only way to minimize the damage is to find the best deal before signing on the dotted line.
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