A personal loan is a great way to infuse your financial situation with some extra funds, which are great to help you pay for anything from a needed vacation to vehicle repairs. But before you sign your name to any loan, there are some details you need to look at to make your loan experience a positive one. Here are some considerations to think about when you are looking to get your next personal loan.
Check the Interest Rate
One of the most important factors that can affect your lending experience and its cost is the interest rate of your loan. The interest rate is the actual cost of the money you are going to borrow and can vary in price depending on the type of loan. Of course you want to borrow funds at the lowest rate possible, so you should shop around for the best rate.
Talk to your bank's loan officer about any available loans and what you qualify for, based on your business holdings currently with them. Often, if you are already a current banking customer and have showed good credit with the bank, they can be more likely to lend you money at a lower rate.
Is There a Prepayment Penalty?
When you are shopping around for a loan, another important detail to consider is if there is a prepayment penalty on the loan. A prepayment penalty is a fee assessed by the lender if you choose pay off the loan early. The reason the lender may charge a prepayment penalty is because they would be losing out on the loan's interest income if you pay it off in advance, so they may charge a prepayment penalty if you choose to pay it off early.
For example, you get a big tax refund next year and you want to pay off your remaining balance. But if there is a prepayment penalty on the loan, you can pay it off in advance and reduce the interest costs but still have to pay the fee. However, if you shop for a loan that does not have this fee, you can pay it off anytime without having to worry about paying an extra fee.
Set Up Automatic Payments
Another option to consider when you get a new loan is if you can set up automatic payments to pay your loan's monthly payments. This option is a great way to make sure you loan payments are made each month and on time. This protects your credit rating and also helps you avoid having to pay for any late fees. You can either set this option up with your lender or arrange it through your bank account.