One reason why personal loans are popular is that they make sense for individuals who would like to reduce interest paid on their debt. This loan type can also help simplify the debt repayment process.
For instance, you could take a single loan to repay several credit cards debts. When you are considering taking out a personal loan, it is essential that you compare the available options cautiously. The following step-by-step guide can help you.
Things To Consider When Comparing Loans
Personal loans are issued by banks, peer-to-peer money lending networks, credit unions, as well as moneylenders. While you are comparing loans from different moneylenders, below are several points of evaluation to consider.
Process of Application
When timelines and convenience are important for you, the simplicity of the process of application is a factor to think about as you compare loans. Usually, you can apply online for a personal loan. For someone who prefers to apply online, then remove any lenders who want an in-person visit. When fast approval matters to you, don’t obtain loans from lenders whose timelines are longer. Most financial institutions offer rough estimates of the timeline the processing will take.
Throughout the application process, it is frequent that lenders to offer you a pre-approval rate set in for 90-days depending on the information you provide at first. Borrowers need to ask lenders whether the rate can be changed before your request is finalized. Also, ask if it’s possible for rates to change once the request has been presented. Preferably, find moneylenders who aren’t going to modify your rate immediately after you’ve applied.
For the application process to go faster and easier, ensure you are prepared to make the application for your personal loan. It could include gathering current pay slips and tax returns, have a list of property and your liabilities and getting W-2 forms plus 1099 forms indicating the salary earned. For self-employed individuals, it will show wages earned in the last two years.
Unsecured Vs. Secured Personal Loans
An additional key feature for you to consider when you are comparing personal loans is whether the personal loan you are taking out is unsecured or secured. When your loan is unsecured, no collateral is needed to guarantee your loan.
This means that there are higher risks for the moneylender should you fail to repay and it’s harder for you to qualify for loans. When it comes to secured loans, presenting collateral means you are taking the risk of losing when you can’t repay.
But, it’s easy for you to qualify for a loan because your moneylender can always acquire the collateral. Even then you need to choose whether you would like to assume the risk by taking a secured loan.
While you are comparing personal loans, it is important that you ensure that you can really get the loan you wish to take out approved. The key factor that will determine if you will be granted a loan is the credit score.
In Singapore, many lenders accept a credit rating of about 600 for them to approve your personal loan request. Individuals who are eligible for the financing terms often have a credit score of about 700s and above. This needs to be supported by the records showing timely payments in past and current financial obligations.
Most banks in Singapore won’t disclose exact score procedures, but they offer estimates of the lowest credit scores needed for you to get an approval. As you compare different loans, ask about the lowest credit ratings needed thus you can avoid reapplying to any moneylender who might turn you down depending on your credit records.
Annual Percentage Rates
You will also need to consider the borrowing cost. This is among the most important aspect of determining the type of personal loan you’ll choose to take. The rule of thumb at this point is when you are able to access a personal loan that offers lower rates than your debts from the bank, it’s much better than you consolidate the debts into the personal loan.
So as to compare the borrowing costs among various personal loan providers, ensure that you check the annual percentage rates (APRs). APR is total rates of interest on a loan for a period of one year. These vary depending on your credit score. The lower your APR, the less your costs on the personal loan. As the most important deciding issue make sure to do many personal loans comparisons.
The biggest reason why people take out personal loans is to simplify debt repayments. When you are able to consolidate 3-4 higher interest loans to a single one, it will make your life much easier.
Although one payment is convenient, try not to spend too much on repayment of your personal loan. Longer repayment term means that it will cost you more in sum interest whereas shorter repayment periods means the balance will be repaid sooner thus interest costs are lower.
When a loan term is longer but you would like to reduce the interest costs, you might wish to repay the loan quicker. Confirm whether there are penalties on prepayment from all moneylenders you would wish to work with. When you’re looking at repaying your loan sooner, it’s essential you ensure that you won’t get penalties for that.
The easiest way to compare loans is by visiting our website. By following these tips you will be able to compare personal loans obtainable from this marketplace and see whether there is a suitable loan for you.
Most personal loan moneylenders charge origination fees when approving loans. Fees might be low to about 1% but might also increase to a high of 6%. When you borrow $5,000 and your origination fee is 1 percent, the fee will be $50.
For a similar amount, when the origination fee is 6%, you will need to pay $300. Thus high origination fees increase the borrowing cost, so get a moneylender who is offering low or no origination fees.