(Newswire.net — November 8, 2017) — When it comes to personal loans, you can be sure that there is one out there that can help you out financially, covering your unpredicted expenses or supplementing your vacation funds. However, what isn’t guaranteed is the fact that you will get approved. Whenever you apply for a loan, there is a possibility for you to get rejected, and it happens more of than you would think. Lenders don’t want to make poor business decisions and lend money to people that can’t pay back. This article focuses on how you can improve your chances of getting approved, by understanding all there is to a personal loan.
Understanding what a personal loan is
A personal loan is a fixed amount of money which you borrow from a lender. In a set period of time following the loan, you have to repay that amount of money as well as a fixed interest, which is also agreed upon. During the period of time you have at your disposal to repay the loan, you can choose to follow the payment schedule (paying a fixed amount which represents an equal portion of the loan) every month, or you can choose to pay more. If you decide to pay extra, you shorten the life the loan as well as the total overall amount that you owe.
Secured loans and unsecured loans
If you are going to apply for a loan, you might be presented with the option of choosing between a secured and unsecured loan. Usually, an unsecured loan is better because it means what we’ve just described. However, a secured loan is when on top of those conditions, you add the fact that your personal belongings are taken as collateral. This means that in case you can’t pay up as agreed, the bank or lender will take the collateral as payment. This can be helpful because it lets you access bigger loans, but also dangerous if you put something like your car or house as collateral. As a general rule of thumb, you shouldn’t get into a secured loan deal if there is any shred of doubt that you will be able to repay everything in time.
The interest rate
The interest rate is usually fixed but there might be cases in which it is variable, not to mention that there might be some other taxes involved as well. It’s best to ask your lender everything about the interest rate before you go through with the deal. Make sure that you know about every tax that you are subjected to by taking the loan. Also ask what happens to your interest rate if you pay up early or late, and have them give you the full rundown of how your interest is calculated. You could also inquire if you can do anything to lower it.
This should help you have the knowledge you need on personal loans, so you should feel more comfortable about applying for one. Being well documented on the matter helps tremendously, since you can’t be taken by surprise later on.