You may take a personal loan for various reasons—to take care of an emergency, consolidate your debt, deal with a personal cash-flow issue, pay for a huge household expense, and the like. However, there are some things you must be careful about while taking out a personal loan. Here are some dos and don’ts.
Dos
Ensure The Rate Fits In Your Budget
While taking out a personal loan, you should be sure of what kind of APR works better for you—variable or fixed-rate. The interest rates of the former are more likely to go up than down, while in the case of the latter, as the name suggests, the interest rate is fixed.
You must also determine if you want a short-term loan (3 years or less), or a long-term one. Although long-term loans have lower monthly payments, due to the duration of the loan, the interest is more and leads to you having to pay more.
Finalize How Soon You Need The Loan
If you need the loan to deal with an emergency, consider looking for an online loan provider like Credible or LendingTree. These providers can process your loan within a few days, unlike traditional lenders, which may take weeks to finalize your loan.
If it’s not an emergency, explore all your options well and choose a deal that works the best for you.
Don’ts
Ignore Your Credit Score
Your credit score plays a crucial role in determining your eligibility for a loan. If you apply for a loan without checking your credit score and get rejected due to a low score, it lowers your score further.
Find out your credit score before you start applying for a loan—it’s free. Once you have your credit score, you can choose a loan that matches your credit standing. If your credit score is low, approach a lender who offers loans to those with low credit.
Lie On Your Loan Application
If you lie on your loan application or withhold information, the bank or lender is likely to figure it out quickly. When they do, your loan is bound to be canceled, in addition to your credit score taking a hit. The lesson here? Lying on your loan application is not worth it, so be honest.
Keep these dos and don’ts in mind while taking out a personal loan to simplify the process!
