Emergencies and unexpected circumstances come up all the time. These situations often bring with them the need for money that you don’t have on hand. The good news is there are thousands of lenders out there waiting to help you through this time, no matter the reason you are in need of a loan. The hard part is knowing exactly what you need so you can get the best loan possible.
When you are choosing a loan company for a personal loan, here are the factors you need to consider before signing on the bottom line.
The Basics of Borrowing
When you have no other options, a personal loan can be a lifesaver. It shouldn’t be your first alternative since personal loans tend to have higher interest rates and monthly payments, but if you have exhausted your other avenues and still feel the need to borrow on this type of funding, your next decision is whether you need a secured or unsecured loan.
For the majority of borrowers, their personal loans are unsecured. However, you may be able to obtain lower interest rates or even better terms with a secured loan. This is because in a secured loan there is collateral that you offer to the lender as a promise that you won’t renege on your payments. If you do, they will still receive some sort of payment, usually in the form of a house deed, automobile title, or other transferrable items.
Unsecured loans are more common, though. For these loans, no collateral as necessary, but to make up for the uncertainty of lending money without a guaranteed promise of repayment, interest rates are usually higher. Your credit plays a big role in your approval, your interest rate, and your terms. More information on what is needed to obtain personal loans can be found if you read this loan review.
What a Good Loan Company Looks Like
There are many places that you can turn to for a personal loan, and once you start searching online and “word” gets out on the internet that you are looking, you’ll get lots of mail and emails making offers. You need to know how to weed out the reputable companies with those looking to make a lot of money at your expense.
Financial institutions like banks or credit unions are where most people first consider going to for their money needs, and these are definitely reputable and stable places to go. However, they don’t always give you the best rates and it can be difficult to be approved for a bank or credit union loan.
If you don’t have pristine credit, you may want to turn to another source of lending, such as a consumer finance company, online lender, or peer-to-peer lender. If you qualify, you could actually be approved within minutes for reasonable rates and terms.
There are many lenders out there who aren’t reputable, though. Be careful before placing your sensitive personal financial information into any forms. If you have concerns about the legitimacy of a potential lender, check with the Consumer Financial Protection Bureau or Better Business Bureau. Do a Google or Yelp search. Put some research in before you give them the means to your identity and bank account.
Your Lending Options
A personal loan may not be the best choice for your needs. Depending on your financial goal, you may even have other options.
Personal loans are great for giving you access to cash quickly. This may be something you need for home renovations that have to be done at once and can’t be paid over time, like kitchen remodelling or a new roof. Down payments for a mortgage loan may require a personal loan. You may even decide that the terms of one larger personal loan are easier to manage than multiple smaller debts with higher interest rates, so you may look into consolidating.
However, you might be better off with a balance transfer credit card with a 0 percent introductory APR if you simply want to get rid of a couple of credit card bills. This will require that you have good credit and pay off the balance before the end of the 0 percent APR period, or you could end up in worse shape than you were previously.
Another possible option if you are already a homeowner is to apply for a home equity loan or a line of credit. They are different, so be sure that you know what you are getting into before you sign.
A home equity loan is a type of secured personal loan that works a little differently. If you have equity in your home (it’s worth more than you owe), you can access that equity in the form of a loan that you pay back in instalments. These tend to be lower interest rates because the lender already has your secured guarantee in your home’s title.
Home equity lines of credit are similar in that they use the equity your home has available and your house is collateral for your repayment guarantee. They are different, though, in that your credit is a revolving amount. You can pay it off and then use more, up to a specified amount, over and over again until the end of the terms. If you are smart with your money, an equity loan or line of credit might be the answer to your needs, but be careful – you are putting your house on the line if you default.
Don’t Just Jump In – Choose the Right Loan Company
You may feel cornered into a desperate loan with a shady company and high rates. Or you may simply be overwhelmed with options and you choose the first one that looks decent. Neither of these is good for you in the long term, and it’s important to stop, take a step back, and do a little more research. When you find the loan that you need, you can then look for a loan company that is reputable and ready to help. No matter your circumstances, there is a loan company out there that is right for you.