Personal loans can boost your finances when you're short of cash or want to consolidate multiple debts into one. Here are 10 personal loan tips to help you find and compare personal loan offers in 2016.
Before You Look for a Personal Loan
- Check your credit scores: Higher credit scores typically allow you to qualify for lower interest rates on personal loans. If you suspect that your credit scores are inaccurate, request free copies of your credit reports and review them for errors. If one of your credit scores is significantly lower, this could indicate a reporting error or fraudulent use of your credit. You can check your credit score for free here at LendingTree.
- Review your finances: Review your current finances and obligations before taking on more debt. It's also important to know the reasons for accumulating debt. Paying off an emergency medical expense is one thing, but having a field day at the mall every weekend is cause for concern. The Federal Trade Commission advises consumers to develop a budget based on cash income and obligations. This can help you avoid impulsive spending.
- Consider your reasons for taking on a personal loan: Consolidating debt with a personal loan can streamline bill paying chores, but it won't work if you add more debts after consolidation.
Personal Loan Tips for Loan Shopping
- Request multiple loan quotes: Request personal loan quotes from your bank or credit union and shop online. Compare loan rates and repayment terms and request full disclosure of lender fees and charges. Extra loan costs can eat up savings gained through a lower interest rate. Choose your favorite loan quotes and contact each lender for more information.
- Compare loan options: Personal loans may cost less than credit card balance transfers and do not require collateral. While you may qualify for a home equity loan or line of credit, you'll have to put up your home as collateral. Personal loans require set payment amounts made over a specific loan term. This assures that you'll pay off your personal loan; it won't have an open-ended repayment schedule and you can't increase your personal loan balance.
- Rates are only the start of loan shopping: While bargain basement loan rates are attractive, they won't mean much if accompanied by costly lender charges and other fees. Of course, you can minimize costs by avoiding late fees on your account.
- Get answers to your questions: Don't make assumptions or allow your questions to go unanswered. You'll need the facts for each loan you're considering before choosing the personal loan that works best for you.
Things to Keep in Mind
- Your personal loan will work only as well as your commitment: Making payments on time and not running up more debt after taking out a personal loan will help keep your finances on track.
- Borrow responsibly: While it's possible to borrow a personal loan for a grand vacation or a down payment on a luxury ride, be sure you understand potential consequences of taking on nonessential debt. What would happen if you lose your job or experience another financial hardship? Know the answers before borrowing a personal loan.
- Compulsive spending problems? Help is available: A personal loan won't help clean up your finances if you're a compulsive spender. You can seek debt consolidation and budgeting help through certified credit counseling services.
Thorough analysis of your borrowing needs and prospective loan terms will help with selecting a personal loan that best meets your individual needs and financial goals.