There are more than 21 million people who are paying back personal loans at any given moment. As a result, people are pretty much always applying for personal loans at all times.
If you happen to need money right now, applying for personal loans might be the best possible way to get your hands on it. You can have cash deposited directly into your bank account within just a few days when you make the decision to take out a personal loan.
Prior to applying for personal loans, though, people should make sure that they carefully consider a handful of factors. These factors will help you determine whether or not taking out a specific personal loan is in your best interest.
Here are ten key factors that you should think about when you’re applying for personal loans.
1. Loan Purpose
Before you begin the process of applying for personal loans, you should think long and hard about what you’re actually going to use a personal loan for. You should not take out a personal loan just because. Instead, you should have a clear intent for it.
Some people will take out personal loans to consolidate their debt. Others will do it to catch up on their bills. And in certain cases, it’ll even make sense to do it to make an emergency car repair or to pay off a medical bill.
Whatever the case, you should have a clear purpose for a personal loan all laid out. It’ll prevent you from borrowing money and spending it on things that you don’t necessarily need.
2. Loan Amount
Once you know what you’re going to use a personal loan for, the next thing you should do is decide how large the personal loan is going to be. Most personal loan providers will let you borrow anywhere from a few hundred dollars to tens of thousands of dollars.
You should sit down and calculate exactly how much money you’re going to need to pay off whatever your personal loan will be used for. Ideally, you don’t want to borrow any more money than you have to since you’ll be responsible for paying it off later.
3. Loan Provider
Applying for personal loans is super easy these days, in part, because of all the loan providers that are out there setting people up with them. You’ll find that there is no shortage of options for loans when it comes to tracking down providers.
You might be able to take out a personal loan through your local bank if you would like. You can also do it through any number of online lenders. There are even lenders that specialize in dishing out bad credit personal loans.
It’ll be your job to look around at your different options as far as personal loan providers are concerned so that you can find the right one to set you up with a loan.
4. Loan Terms and Conditions
All personal loans are not created equal. There are some personal loans that have very high interest rates attached to them and personal loans that have very low interest rates attached to them. There are also personal loans with rates that fall somewhere in between those two extremes.
As a result, you’re going to have to go through the loan application process with at least a few different lenders in an effort to get the best loan terms and conditions possible. In a perfect world, you want your interest rate to be on the lower end of the spectrum so that you’re able to repay a loan fast without any problems.
Comparing loan costs from one lender to the next is an easy way to ensure that you get a great deal on a personal loan. You won’t have to worry about paying any more than you should have to in order to satisfy the terms of a loan when you take this approach.
5. Loan Fees
The personal loan industry has become very competitive in recent years. There are a whole bunch of lenders fighting for the attention of those interested in applying for personal loans.
Because of this, you shouldn’t have to be concerned about paying high fees when taking out a personal loan. Many lenders have started to slash their fees to stand out in the crowd.
There are, however, usually going to be some fees attached to a personal loan when you take it out. You shouldn’t be shy about comparing the fees that are charged by different lenders so that you don’t get stuck paying too many high fees.
6. Loan Penalties
In the event that you miss a single personal loan payment, you’re typically going to get hit with some kind of penalty. Some lenders will charge you a late fee, while others will send your interest rate skyrocketing.
It’s very important for you to be aware of what kinds of penalties you’ll face when you taking out personal loans through different lenders. The last thing that you want to do is work with a lender that’s going to sucker punch you with penalties when you’re not expecting them.
7. Loan Repayment Period
Do you want to try and get a personal loan repaid within a single year? Or do you want to stretch your payments on a personal loan out over five years?
Most personal loan providers are going to provide you with some flexibility when it comes to repaying a loan. But others are going to force you to repay a loan within a certain amount of time, even if it doesn’t make much financial sense for you.
You’re going to want to choose a lender that will extend a reasonable loan repayment period to you. You’ll be able to set yourself up for success by selecting a lender that can give you the time you need to repay a personal loan.
8. Loan Payment Options
Just about all personal loan providers are going to expect you to make at least one payment to them each month to repay the loan that you take out. But they’re not all going to accept payments from you in the same way.
You should try to locate a personal loan lender that will set you up with many options with regard to repaying your loan. You should be able to make some combination of digital and in-person payments to them if you would like to. It’ll make it even easier than it would be otherwise to pay back the money that you borrowed from them.
9. Loan Collateral
In some instances, personal loan providers are going to ask you to put up what is called collateral when taking out a loan from them. Collateral is an asset that is used to secure the loan that you’re taking out.
The good news for those applying for personal loans is that collateral usually isn’t necessary. But depending on your credit score, you could be put in a position where you have to put up a car, a piece of real estate, or something else as collateral.
You should decide whether or not you want to put up something as collateral when taking out a personal loan. You might be able to find a lender that will extend a personal loan to you without requiring any collateral on your part.
10. Loan Alternatives
Taking out a personal loan isn’t the only option that you’ll have when you need to get your hands on cash fast. You can also find other ways to obtain the money that you need in a hurry.
For example, you can ask a family member or a friend to borrow money if you would like. You can also take out other types of loans, like title loans. You can even choose to wait to save up the money that you need over a long period of time.
More often than not, you’re going to come back to personal loans and find that they’re truly your best option. But it never hurts to consider all the options that you might have so that you don’t end up borrowing money in the wrong way.
Start Applying for Personal Loans Today With These Factors in Mind
Applying for personal loans isn’t something you should do on a whim without putting any thought into it. You should make it a point to look high and low for the best personal loans in the business prior to applying for one.
You should also consider each of the factors that we’ve listed here. They’ll help you hunt down a personal loan that you’ll be able to pay back in no time at all. They’ll also make you feel more comfortable as you navigate your way through the personal loan application process from start to finish.
Would you like to read more about personal loans and how they can benefit you? Check out the other personal finance articles on our blog to get additional information on these kinds of loans.