The logic behind taking out personal loans has been questioned in several quarters. For example, a part of the Christian holy book – the bible; states that the borrower is a slave to the lender. By and large, there are several schools of thought on the subject.
Be that as it may, finance experts can be considered real authorities when it comes to answering questions of this nature. To this end, their take is that a personal loan is neither good nor bad. The answer would depend on several factors including:
- The reason for securing the loan
- The loan’s terms and conditions
- The possibility of repayment based on the borrower’s financial status
- The borrower’s commitment to repaying the loan
By and large, the lender and especially the borrower determine if taking out a personal loan is a good or bad idea. You can check here for more information on this subject.
Speaking of both the lender and borrower playing a huge part, the secured loan has to be the right one. This means that it should be best suited for the borrower. More on this will be addressed here in this article.
Tips for Finding the Best Unsecured Consumer Loans
Many loan applicants are so concerned with finding a loan that they pay very little or no attention to finding the right kind. Proper orientation is important for this reason.
To this end, you should know that a loan is a financial service by a creditor. It is therefore within your right to insist on getting the best possible service. You can even look elsewhere when a reasonable compromise with the creditor cannot be reached. In other words, the lender would not be doing you a favor but offering a service by granting you the loan.
Furthermore, you are under no obligation whatsoever to accept the proposed loan terms and conditions by the creditor. Having made these important facts known, here are some helpful tips for finding the best unsecured consumer loan deals:
Do a Thorough Assessment of Your Financial State
You need to know where you stand financially for several reasons. Firstly, this information helps you figure out how much you need to borrow.
Some people borrow money without executing this important step. As a result of this, they can end up borrowing less or more than they should.
In a situation in which less is borrowed, much of the purpose for taking out the loan can be defeated. There may even be a need to take out another one, which significantly increases costs as servicing a single loan is usually cheaper than paying several debts. In a situation in which you borrow more than you should, repayment can prove very difficult.
In other words, your needs should not only influence the assessment of your financial state. It also has to be influenced by your ability to repay debts. This ensures that you do not take out more than you can repay.
Pay Attention to Your Credit Score
Your credit score plays a huge part in determining how good the terms will be, or even if you will be granted the loan. Here is a supposed scenario to help you understand its significance in this context.
Mr. Erik is offered a loan of 200,000 Norwegian kroner to be paid over the course of 3 years at an interest rate of 7 percent. The same lender offers Mr. Anders a loan of 200,000 Norwegian kroner to be paid over the course of 3 years at an interest rate of 12 percent.
The same bank is offering two applicants the same amount, to be repaid within the same timeframe, but at different interest rates. The question is why?
The difference in the credit score of both applicants is usually the reason for this. While Mr. Erik has a credit score of 75, Mr. Anders has a score of 32. The implication is that Mr. Erik is a far more creditworthy applicant than Mr. Anders.
In light of this, loan applicants need to pay serious attention to improving their credit scores. This is particularly before applying for loans. Some of the proven tips to help improve credit rating include:
- Evaluating credit reports to check for discrepancies
- Not using too many credit cards
- Opting for secured credit cards
- Timely payment of bills
- Identifying and prioritizing high-interest debts
- Responsible use of credit cards – Not maxing out credit limit
Exercising patience is also important. The reason is that the process of improving credit scores takes time, even though it is a huge possibility.
You need to identify the right lender. These are lenders who are perfect for your kind of profile.
For example, some options are more lenient towards applicants who have low credit scores. They do not only offer such applicants credit lines but do so at reasonable rates. So, this is what an applicant with a low credit score should be considering.
Furthermore, you should be open-minded while searching for the ideal lender. For example, you do not have to limit your search to traditional banks alone. Peer-to-peer lenders, credit unions, and online lenders can be explored, as well. However, make sure you are dealing with a legitimate lender to avoid issues down the line.
Compare Terms and Conditions
Loan applicants have leverage in the credit market. The competitiveness of the credit market is their advantage. In other words, there is a long list of creditors willing to offer their credit services. This is especially to those who have their credit score and other aspects of their credit history in order.
To this end, applicants should be willing to use their leverage in the best way possible. First, this is by getting loan offers from various lenders.
Thankfully, there are tools to conveniently help in comparing what various lenders offer in the market. You can visit https://www.billigeforbrukslån.no/beste-forbrukslån for more information on this. It is also possible to engage loan agents as they can quickly get offers from various lenders and present them to applicants who use their services. By the way, a couple of things should be the basis for comparing various lenders in the credit market and they include:
- APR (annual percentage rate)
- Maximum loan amount – This is especially for those who need to borrow large amounts
- Repayment terms
- Loan fees
The goal should be to select the right lender. For this purpose, serious attention needs to be paid to comparing the several options and choosing the one best suited for you.
Understand the Terms & Conditions
You will be bound by the terms and conditions in the loan agreement once you consent to it. For this purpose, it is only ideal that you understand everything that is implied in the agreement before you give your consent.
First, this calls for reading through the agreement. Then, clarifications should be sought for areas where you are confused or where you do not fully understand what is meant.
You should pay serious attention to the parts of the agreement that focus on fees and penalties. This is because it says a lot about how costly and harsh using the credit line is.
Checking eligibility status should precede comparing lenders. This is because there is no point in comparing options that do not consider you eligible enough to be offered credit services. Furthermore, the eligibility requirements should be based on the lender’s conditions rather than general requirements.