Sometimes you’re in a tight spot and need to borrow money. Personal loans are a great way to borrow money when you need it. But when it comes to finding a loan company, how do you know who to trust? Credit.com is going to help you know what to look for in a loan company.
What Is a Personal Loan?
A personal loan is when you borrow money and pay it back at a later time with interest. In order to determine your eligibility for a loan, lenders use:
- Your credit score and credit history
- Your income
- Your employment status
- Your other debts and expenses
Once you’re approved for a loan, you’re told how much you pay each month, as well as how long the payments last. Failure to do can lead to your account being sent to collections and possible legal action against you.
Reasons to Get a Personal Loan
Getting a personal loan isn’t always hard. But that doesn’t mean that you should apply for every loan you see. Apart from the fact that you can find yourself under a mountain of debt, there is one other huge reason why you should proceed with caution when applying for personal loans-they show up as hard inquiries on your credit reports. Too many hard inquiries can lower your credit score.
That, however, doesn’t mean that there aren’t some excellent reasons to get a personal loan. Some reasons to get a personal loan include:
Medical emergencies are never convenient. In many cases, you find that when the worst happens, your medical insurance doesn’t fully cover you. You have to pay for the rest yourself. If you don’t have an emergency fund or your savings account is running low, then you might have to take out a personal loan. A personal loan can help you pay off these medical expenses and make them more managable.
Home improvement projects are a popular way to increase your home’s value. Some of these projects, like roof replacements, cost thousands of dollars. Taking out a loan for home improvement projects may actually end up paying off.
If you’re carrying debt on different credit cards, then a debt consolidation loan may be your answer for paying these accounts off. Sometimes, you may miss a few of these payments-not because you can’t pay but because you simply forget to pay it. These late payments lead to additional late payment charges and increased interest on credit card debt. To avoid late fees and high interest rates, you can pay off all your credit card debt with a loan.
Whether you want to buy a car or replace some of your home appliances, you probably don’t have enough cash to pay for it upfront. Taking out a personal loan can help you pay for these purchases.
As long as you have a plan on how you’re going to pay back your loan without missing a payment, taking out a personal loan can be very beneficial. However, you need to use the right lender.
What to Look for in a Loan Company
If you’re thinking about taking out a personal loan, here are some things consider before choosing a personal loan company:
- Interest rates: Variable interest rates are often cheaper at the beginning but riskier in general.
- Reputation: Do these loan companies stick to the contract you signed? Will they share your private information with advertisers or other companies?
- Terms of the loan: You need to find a company with flexible repayment terms. One that not only offers the best rates but one also willing to work with you and allows you to set your payment date.
- Upfront fees: A loan company that has a lot of upfront fees may not be worth it.
Finally, you need to find a loans company that cares about you as a customer – one that offers you 24/7 customer service and one always ready to talk to you about your loan.