There may be times when you need to think about borrowing money. But what can you do if your credit is not perfect and you don’t own something that can be used as collateral? Many people today turn to small personal loans, but they are not all the same. Here are some important things to look for, when you apply for unsecured financing.
Length
Let’s look at an example. Loan A can be repaid in one year, and loan B gives you two years. A first glance, the two-year loan looks the most attractive because the payments are lower. However, when you stretch out your payments, you end up paying a lot more interest. If your budget can handle the higher payments, it’s a good idea to do so.
Prepayment Penalties
Before you shop for small personal loans, make sure to check into prepayment penalties. Here is an example, suppose you have one year to pay off the loan, but you discover you can pay it off after 5 months or so. With some lenders, you’ll have to pay a substantial fee if you pay off the loan ahead of time, so make sure you are aware of this issue.
Variable Interest Rates
Although uncommon, some small personal loans may come with variable interest rates. This can be a risky proposition because your interest rates are tied to the current loan market. If inflation hits, your payments could increase substantially, and this could make it harder to pay off your loan and may result in financial hardship.
Shopping Around
It pays to shop lenders when you need a signature loan. In fact, if you check with a personal loan resource provider, you can get the best terms. They check with many lenders to match your needs and credit rating to the financing programs available.
