Financial surprises happen to the best of us, as an unexpected bill, car or home repair, or large unplanned purchase can creep up at any moment. When savings won’t cover what’s needed, a personal loan can be a smart choice in covering the cost and repaying it over an extended period. Personal loans often have a fixed rate, a predictable monthly payment, and a payment term that can stretch over several months to several years. However, getting the best personal loan for your specific financial needs isn’t always a simple task. There are a few steps to take to ensure the financing received makes the most sense in terms of total cost, repayment, and long-term financial impact.
Steps to Securing a Personal Loan
Several different lenders offer personal loans, from online resources to traditional banks. With any lender, borrowers will need to know where they stand before applying. This means understanding good and bad credit, as well as your monthly budget. If you have strong credit, meaning your financial track record is solid, you’re likely able to get a personal loan without too much trouble. Bad credit on the books may mean lenders charge more for a personal loan by way of the interest rate, or a borrower is declined because they pose too much risk to the lender. Take the time to check credit history with the credit agencies – Experian, Equifax, and Callcredit – before applying so you know where you stand.
Borrowers also need to evaluate their ability to repay the loan over time. Personal loans come with fixed monthly payments, but depending on the term offered, that could a relatively high amount. Consider what other bills and expenses you must pay each month and your income to see if there is room in the budget for a new monthly payment.
Securing a personal loan also requires an application so a lender can see where you stand. Don’t take the first loan offered to you from just any lender. Be sure to shop around, so you know what rates are available and the repayment terms that go along with those rates. This is an essential step in getting the best personal loan because there are countless financial institutions offering financing to qualified borrowers. Once you select a lender, an application can be submitted either online or over the phone in most cases, and borrowers know if they are approved within one to a few days.
Payday Loans: A Last Resort
Some lenders offer payday loans under the guise of personal loans, but these financing options differ significantly. According to a finance expert from MoneyPug, a website to help borrowers compare the best payday loans, for those who have no option for a traditional personal loan, payday loans can be a last resort for getting the money needed. Payday loans are a risky way to borrow because they offer incredibly high rates as well as very short repayment terms. Borrowers can get access to smaller loan amounts than traditional personal loans, even if credit is an issue, but the cost can be excessive.
Even though payday loans carry the greatest amount of risk for borrowers, they can be beneficial in getting access to cash quickly particularly for those with less than perfect credit. It is important, though, to compare options from various payday loan lenders, including the cost and repayment term, to ensure you are getting the best possible deal.
Know Before You Borrow
Getting the best personal loan requires some homework on the type of loan you can afford and qualify for, as well as the costs associated with each. Payday loans offer convenience without a credit check, but the potential triple-digit interest rates can make them a bad choice for those who are eligible for a personal loan elsewhere. Through more traditional lenders, a personal loan with a fixed rate, in the single digits, and a few-day turnaround time can be more beneficial in the long run.
Before borrowing, it is necessary to review your options from a few different lenders. It would help if you also took time to realise what you can afford to repay on a month to month basis. It may be worthwhile to see if there are other ways of financing your needs before borrowing, such as available savings or investments. These simple steps will help you get the best personal loan if and when it is needed, without costing an arm and a leg.