Deciding on what kind of loan best suits your needs can be an overwhelming process. There are multiple different kinds of loans available, and trying to understand and choose between low-interest loans, unsecured loans, payday loans and more can take some time. Applying for the wrong loan type for your needs could leave you paying unnecessary interest or fees. This quick and easy guide takes some of the headache out of choosing!
What is a personal loan, and how do they work?
Personal loans are used for several purposes, from financing personal purchases to consolidating your debt. However, a personal loan can also be used for investment purposes.
You can choose to have the loan paid to you in a lump sum or as line of credit. If you choose a lump sum, you will pay it off over a pre-agreed term, usually over several years.
How to compare loans online
You’ve found a loan that looks right for you. Now, how do you decide who to borrow from? Ensure that your lender offers clear guidelines to help you choose what’s right for you. Wonga lays out some easy steps to help you compare loans here.
Repayment terms: One of the most important things to check for is the loans repayment flexibility. Can you decide if you want to pay weekly, fortnightly, monthly, etc.? Having flexibility here can help you decide on a repayment schedule that suits your lifestyle. You should also determine if you are allowed to make extra payments without suffering any penalties or restrictions. Maybe you’d even like to pay back the loan early if you can! Make sure the loan’s repayment terms give you the control you need.
Loan purpose: Next, make sure that you can use the loan for the purpose you need. Secured loans often come with restrictions on how you can use the loan. For example, if you take out the loan in order to buy a car, you will only be able to spend the loan on a car purchase. Another example is using a personal loan for investment purposes – some personal loans will not allow you to use them for business.
Loan management: Finally, compare your loan possibilities with how easy they will be to manage. Some lenders offer online account management, but some don’t. You may also have to pay off the loan directly, rather than using direct debit. You may even find the lender difficult to contact if you have questions or need assistance. Check to make sure! These three simple tips can go a long way when it comes to comparing the variety of loans available and choosing the right one for you, your needs, and your lifestyle. Make sure to ask questions and take your time making the right choice before getting into debt.