Basics of a Personal Loan
Are you in need of some extra money? Sometimes you just have to spend the money that you don't have. There are many people that are turning down the credit cards and turning to small, closed-end, unsecured loans instead.
Approximately 1/5 of all nonmortgage installment loans are personal loans, says Jane C. Yoa, managing director for surveys and statistics for the American Bankers Association. "It's a product that banks are finding a demand for in the market," she says.
Many banks don't advertise that they offer unsecured loans because they are not as profitable as other loans. They bank would rather offer a credit card because it is a long term commitment, ongoing in many cases.
Using a credit card for short-term loans isn't the best option for the typical borrower. The high interest rate can accumulate more in interest payments. Plus, you must be very disciplined to only use the card for that loan. You have to pay it off like a loan; minimum payments could take you decades.
First, you need to decide how much money you really need. Look for the least amount of money that will make everything work out. Look at your credit situation and decide if you truly can afford one more loan. If you don't have an emergency fund, you may find that you have few other options.
Once you know that you will need to take out a loan, start shopping around. Terms can vary and you want to find the best rate possible. Call around and talk to all the banks in your area, plus some national lenders. Don't just go to a payday lender, talk with your bank or credit union first.
What kind of rates should you look for? Two year personal bank loans are averaging above 11.8% for interest rates. Credit unions may offer better rates and terms than banks, because they often are non-profit institutions.
Short-term unsecured loans can be found at 96% of all credit unions, and many make loans in amounts less than $500. Most people borrow an average of $2,300. Many loans under $500 can be made with a quick limited credit check.
When it comes to your terms, look at the total cost of the credit, not just the monthly payments. While you may want to pay the least amount possible per month, a longer payback period means you pay much more in interest.
Look for any hidden fees and charges. You don't want to pay for credit insurance, buying clubs or other extra fees. If you don't understand what a fee is going towards, make the loan officer explain it. Ask about each charge and fee.
Read everything carefully before you sign it. If you are told something different than what is in writing, only trust the writing. Once you have signed something, any verbal conversations mean nothing. You have no agreements unless they are in writing.
Don't let the officer talk you into borrowing more money than you need. Recently a loan officer offered me $5,000 more than I was asking to borrow. I didn't need the temptation, the added interest costs or the extra debt, so I politely refused. Many officers receive a commission based on the loans they approve. Know what you need to borrow and stick with that amount.
Often, the bank will offer you a credit card instead of an unsecured loan. This isn't a great idea. The rates aren't fixed and can change during the course of the loan. Credit cards are considered revolving credit, which means you have no set repayment date. It might sound attractive, but in two years you could be paying 23% interest. Can you afford the risk? Instead, ask for a specific loan amount with a fixed interest rate and a repayment schedule.
And finally, start saving! Next time you won't need to take out a loan if you already have the money in a savings account. While you are at the bank, go ahead and set it up.
Related Tags: personal loan
Martin Lukac http://www.MartinLukac.com , represents http://www.RateEmpire.com , an Internet consumer banking marketplace. RateEmpire.com is a destination site of personal finance, investing, taxes and mortgage rates. RateEmpire.com provides mortgage guides and financial rates and information. RateEmpire.com also operates a financial portal #1 American Financial, found at http://www.1AmericanFinancial.com
Your Article Search Directory : Find in ArticlesRecent articles in this category:
- The Secrets to Getting Low Down Payment Car Insurance
Upon purchase of a new car, there is almost always a requirement to buy an auto insurance policy as - The Wisdom Behind Auto Insurance Comparison Quotes
No one in his right mind would not go for a good deal. In fact, everyone is out on their feet and ru - The Benefits of Auto Insurance Comparisons Florida
Insurance can be expensive. This is something everyone knows about especially in the sunny state of - Auto Insurance Florida: The No-Fault Policy
There are different kinds of car insurance offered by a wide range of providers today. Different sta - Finding the Cheapest Auto Insurance Companies
Everyone is asking and searching for the cheapest auto insurance companies available today. Consider - How do You Compare Private Health Insurance Cover in Australia?
Deciding what is the best and most affordable private health insurance cover can be easy if you take - How Payment Protection Insurance Was Mis-Sold
For over six years the issue of Payment Protection Insurance (PPI) and how it was mis-sold to custom - Finding Quotes For Auto Insurance Online
One of the many concerns when you are shopping for auto insurance is being able to get access to quo - How You Can Find the Best Auto Insurance Online
When it comes to renewing your car insurance you are going to quickly discover that there are a numb - Guidelines For Searching For Auto Insurance Online
The internet can be a great source of discounts and values related to auto insurance. However, many
Most viewed articles in this category:
- Trading Forex With Pivot Points
Forex Pivot Point Trading are used today by Forex Traders and are calculated on the previous days mo - Where To Search For Free Grants
Where do you look for free grants? The search must be thorough or it could be an exercise in futilit - The Connection Between High Blood Pressure and Salt
We are a society of Salt Addicts. It cannot be denied. When you look at the things we do and the pla - Tips For Avoiding HYIP Scams
Before knowing about HYIP Scams, refer to the functioning of HYIP or "High Yield Investment Programs - Getting Credit After Bankruptcy
Consumers do not have to live sans credit following a bankruptcy. By following certain steps consume - Tips For Choosing A Credit Card
Are you looking for that perfect credit card? If so, you may be confused about what exactly to look - Cheap Car Insurance For Teens Online
Many elements determine a car insurance policy. Car insurance companies look at the person's age, hi - What Exactly Is Free Grant Money?
You can apply for free grant money from various government agencies. But where exactly does this mon - Small Business Owners Marketing and Customer Service
Marketing can be time-consuming, but it doesn't have to be hugely expensive now, thanks to the Inter - Apply Online For A Credit Card - How To Choose A Card?
The best type of credit card for you will be dependant on how you intend to use the credit card. Are