If you are considering to borrow money and pay it back on a monthly basis, Personal Loan would be the best option. But before dipping into it, here are few things that you need to know before you go further.
Personal Loans – being catered by banks or other lender are loans that are not assured by any asset such as your property/possessions. It is also known as unsecured loans.
Advantages of Personal Loans:
> You can borrow more than with a credit card.
> You have the option on how long you would like to repay the loan. But bear in mind that the length of a loan will affect the amount you are charged in interest.
> Interest rate you pay is usually fixed (but not always).
> You can pay your loan on a fixed amount each payment. This means your repayment amount is going to be the same each month and easier on budget.
> You can consolidate few debts into your personal loan, this means reducing your monthly repayment costs. But this may mean extending the length of loan and so paying more.
***You can make over-payments or pay off a personal loan in full before the end of your agreement without penalty.
Disadvantages of Personal Loans:
> Personal loans have higher interest rates compared to other forms of borrowing.
> Because the interest rate may reduce the more you borrow, you may be tempted to take out a bigger loan than you need. This might become a debt pit.
> Older loans normally have an early repayment charge if you want to pay off your loan early or overpay.
Personal loans have variable interest rates, it can go up or down. If you can only make the initial repayments, you should shy away from this type of loan.
Think carefully before accepting any payment protection insurance (PPI) the lender tries to sell you. This insurance will cover your repayments in case of accident, illness or you lost your job. The idea is good, however, it’s been widely mis-sold and many of the policies on offer weren’t adequate or didn’t pay out at all. Much as you want to avoid this cover, you will almost certainly get a much better deal by checking prices with several different providers.
Getting the best personal loan deal can be a bit tricky. Scout for the best offer, consider the interest rate, and compare the rates online. Consider peer-to-peer loans especially if you have a good credit standing. Some loans may offer lower interest rates and are available for smaller amounts.
***SECURED LOANS – If you have a property, you may consider availing of a secured loan. But, you will be exposed to bigger risk, because your property is secured against your loan. If you can’t repay your loan, the lender could force you to sell your home to pay off what you owe.