A personal loan to many people seems like the next best financial decision, especially if they can get it with low interest rates and minimal fees. However, a personal loan hides with it the potential hazard of getting into more debt and it being more burdensome than before you had it. To better prepare you in the case you want to take out a personal loan, here is a brief guide as to what to look for when applying for a personal loan.
Lingo of A Personal Loan
A personal loan carries with it specific jargon to describe aspects of the personal loan. If you are not aware of these terms, you may feel insecure when applying for a personal loan. To raise your security, here are the most used terms when applying for a personal loan.
- Credit Score – Your average score determined by the three credit bureaus, Equifax, Experian, Transunion.
- Interest Rate – The amount you must pay alongside your personal loan minimum each month. This is determined on your credit score and the amount of the personal loan.
- Secured Loan – Secured loans require a form of collateral in the case that you stop paying your loan. This mostly occurs if you take out a loan above $25,000.
- Unsecured Loans – Unsecured loans do not require collateral. However, they will impact your score negatively if you default on payments.
Your Credit Score
With the average credit score in El Paso, Texas being 674, there are numerous options for all credit score brackets for people wanting to take out a personal loan. Most importantly, before applying for a personal loan, check your credit score and adjust any areas that may harm your chances of being approved for a personal loan. These areas include your credit utilization and outstanding debt. Also, if you have any discrepancies on your credit report, it is important to dispute it and inquire with the credit bureaus about the discrepancy.
Shop Around for The Best Lender
As another important aspect of applying for a personal loan, your lender will be the person in which you will be borrowing the money from. Therefore, it is important to get to know the financial institution or private lender you will be working with. Reading online reviews and visiting the lender in person are all important aspects of the shopping around process. To better prepare, below is a list of questions to ask a personal loan lender.
- What is my origination fee?
- What is my interest rate?
- How much does the interest rate total with the loan?
- What is the length of the loan?
- What fees are there if I am late, pay ahead of time, or pay by check?