Personal Loans – Tips to Get the Right Loan for You

Personal loans are one of many types of loans you can borrow from a bank. These loans are typically general purpose loans that you can use at your discretion. Personal loans are often more difficult to get and have strict qualification requirements. If you're thinking about borrowing a personal loan, here are some things you know about them.

 

If there's one rule to follow with personal loans, it would be this: take out the smallest loan you can and arrange to pay it off as quickly as possible.

Try to whittle your personal loan borrowings down to the amount you absolutely need - could you supplement your loan with more flexible borrowing on credit cards or an overdraft? Remember, a bigger loan taken out over a longer period of time may keep your monthly repayments down, but the actual amount of interest paid back over this time will be far more than if you were to borrow the same amount over a shorter term.

 

You don't have to provide collateral or find guarantors, you need not specify the purpose and the approval process is hassle-free. But, this convenience comes at a high cost.

On personal loans, interest rates could in the range of 15-25%, while they could be as high as 30-49% in case of credit cards. Financial advisors cite many instances where credit card holders have been shocked to know much later that they have been paying interest of close to 40% on their credit card outstanding. That is why it is essential that you should avail of such loans only in times of crises.

 

It may be easier to get a personal loan from a bank you already have an account with. The bank will probably want to know what you're going to use the money for and may even have a better loan for your needs. As with any other loan, it's important to choose personal loans wisely and only borrow what you can afford to repay.