If you are contemplating taking an unsecured personal loan, there are a few things you should know before you take the loan. Personal loans can turn into money traps and make you fall into a debt trap with no way out. Here are few things that you ought to know about a personal loan.
Don’t Drag the Loan Duration
More often than not a lender will convince you to take out the loan for a longer duration to reduce your monthly payments. This may seem attractive at the time, but in the end it will cost you more.
Go for Fixed Interest Loan
Variable loan rate may appear tempting if the interest rate is low, but the moment the interest rate increases, your monthly payments also will go up.
Check the Total Amount Repayable
Most lenders will ask you to check the APR or annual percentage rate to come the cost of the loan over a period of one year. However, you should be checking out the total amount repayable or TAR which will tell you the total amount you will pay the lender.
Read the Fine Print
Don’t be taken up by the interest and low monthly payments. When taking a personal loan, focus also on the terms and condition. Check whether you can make over payments or whether you will have to pay a penalty for repaying the loan amount early. These are factors that you should consider when taking an unsecured personal loan.
Check the privacy rules of the lender. Sometimes, lenders reject application but have no qualms of giving your details to another lender. As a result, you will be plagued with other lenders calling you or sending you emails. This can be frustrating and annoying.
Don’t Fall Prey to Marketing Gimmicks
Don’t get taken in by marketing gimmicks, such as cash backs or payment holidays.
Remember if something is too good to be true, it probably is. Most of these gimmicks are meant to lure naïve customers and often end up being an expensive choice.
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