Personal loans are a versatile financial product that you can use to solve a plethora of purposes. Finance a home improvement project, spend on your wedding, consolidate debt or settle an emergency medical bill; there’s no end to things you can do with a personal loan.
But before you take up the final offer on the closing table, compare your personal loan offers. We give you 3 reasons to compare personal loans so that you can avail the lowest possible interest rate on your loan.
Understanding how personal loans work
Personal loans are a financial tool that you can use to bridge some financial gaps. People opt for unsecured personal loans because they’re relatively easier to arrange. You won’t have to provide the lender with collateral to secure an unsecured personal loan. The interest rates for personal loans are higher than secured loans but usually lower than that of credit cards and bank overdrafts. So if you need some financial assistance but do not have a collateral to offer, you may be better off taking out a personal loan.
Your credit score is one of the pivotal factors that dictate the terms on which you get a loan. While personal loans are known to have slightly higher interest rates, just how high they get, depends on your credit rating. With a good credit rating, you are likely to qualify for competitive and affordable interest rates. On the contrary, if you apply for a personal loan with a below-average credit score, you may get offers with sky-high interest rates. Thus, checking your credit score before applying for a loan is good practice. You’ll know what to expect and what you need to work upon to get better offers.
You can repay your personal loan in fixed monthly instalments over a pre-determined pay-off term. Lenders report all your repayments to credit bureaus. While timely repayments aid in boosting your credit score, a missed repayment could bring your score down. Consistently failing to repay will severely harm your credit score, and it could take you a while to get it back to normal. Plus, your lender could take legal action and summon you in court through a CCJ. This further damages your score, making it more challenging for you to secure credit in the future.
How to get good personal loan offers?
Now that you’re well versed with the modus operandi of personal loans, here are some steps to help you find the right personal loan offers online:
- Decide upon a loan amount: This step involves some number crunching. Work out how much money you need to borrow. Assess your income, expenses and budget to figure out an amount that you can afford.
- Figure out a suitable loan term: Depending on the loan amount, work out a tentative pay-off period. Will you be able to settle the loan at the end of this term successfully? Because if you miss any repayments until you pay off the loan, it’ll take a toll on your credit score.
- Pan out a repayment plan: This is a crucial part of the planning process. A repayment plan will help you stay ahead of your repayments to prevent default. Try incorporating your monthly pay-offs into your budget. This will help you set aside some money in advance. Plus, you’ll know what you’re left with for the rest of the month, so you will be able to plan accordingly. Remember to keep the worst-case scenarios in mind. What if you lose your source of regular income? Will your savings suffice for the loan’s repayments? It is always wise to prepare for such unforeseen situations.
- Shop around for loan offers: You’d never know the offers out there if you don’t explore the market. Shopping around for personal loans can help you find your ideal loan offer.
- Understand your loan term: Thoroughly reading legal documents before signing them is not just good practice but something that you should inculcate as a habit. Look for hidden charges or early repayment fee that your lender may be charging. While most unsecured loan procedures are straight-forward, it is essential to pay extra attention to the fine print and hidden conditions to avoid surprises.
3 reasons to compare personal loans online
Loan comparison is a smart way to avail good loan offers. Oyster loans brings you loan offers from multiple lenders to help you find the most suitable one. All you need to do is fill in a simple loan application form.
Here are 3 reasons to compare personal loans online:
- Competitive rates: Comparing personal loans online opens you up to a variety of offers to explore. You can then choose a suitable offer with low interest rates and APR from among your options.
- Low overall loan cost: Annual Percentage Rate or APR is the overall cost of your loan. APR encompasses all overhead costs of borrowing – arrangement fee, brokerage fee, early repayment charges, etc. A low interest rate loan may have high APR. Comparing APRs allows you to choose an offer with lowest APR applicable to you.
- Saves your credit score: Whenever you apply for a loan, the lender will put your profile through a credit check. Multiple credit checks within a short span can be detrimental to your credit score. To prevent this damage, leave gaps between each application, and choose loan comparison sites to view multiple offers with a single loan application form.
Tips to help you manage personal loan repayments
- Strictly adhere to your repayment schedule to protect your credit report from negative remarks.
- Set up a monthly budget to keep on top of your payments.
- If you feel that you won’t be able to pay on time, talk to the lender to find a mutually-agreed solution.
- Try avoiding applying for another loan before settling the existing one. Putting unnecessary pressure on your finances will only worsen the situation.