What to Look for in a Personal Loan (Apart from the Interest Rate)

05-07-2016 | Dojo |

Of course, the first thing you want to look for when getting a personal loan is the interest rate. However, there are other important factors you must consider besides just the interest rate. You will often find many lenders offering similar interest rates, and these additional factors can help you decide how to choose the best option.

Here is a look at things you should look for in a personal loan apart from the interest rate.

#1 Arrangement Fees

One of the most important factors you must considering when choosing a lender is what kind of arrangement fees they charge for their personal loans. Arrangement fees can greatly increase the total amount you will have to pay back for the loan. These arrangement fees will be included in the annual percentage rate in most cases.

That is why it is so important that you consider the annual percentage rate rather than the interest rate when you are shopping for a personal loan. Calculating your payments with the annual percentage rate will give you the true costs of the loan over its lifetime.

#2 Personal Payment Insurance

Most lenders will try to get borrowers to purchase personal payment insurance with their personal loans. While they can be a very helpful tool, it is important you look over these personal payment insurance policies carefully before you agree to buy one. Personal payment insurance will cover borrowers’ payments for them if they get hurt, fall ill or lose their jobs.

While this sounds nice, some personal payment insurance policies have clauses that will prevent borrowers from collecting except in very specific circumstances. You should make sure to read all the fine print before you decide to buy a personal payment insurance policy for your personal loan. Also, keep in mind that you do not have to purchase a personal payment policy from the lender who holds you loan. You can shop around to get the best personal payment insurance to meet your needs.

#3 Early Repayment Charges

Many lenders will charge you a substantial fee if you wish to pay your loan back early. They don’t want to lose out on the interest payments, which is why they often include early repayment charges as part of their standard personal loans. If you think there is any chance that you will want to pay your loan back early, then you be sure to find a lender who will give you a personal loan that leaves out the early repayment charges.

Make sure you consider all these additional factors when you are shopping for a personal loan. The same factors are to be considered if you are applying for online loans.  You can make use of online tools like loan calculators to easily give you an idea how much repayment amount can you afford every month.

These are not trifling details. Getting a loan that has the best all-around components in addition to a good interest rate will ensure that you stay happy over the life of your personal loan.

Leave a Reply

Your email address will not be published. Required fields are marked *

©2020 Personal Finance Blog. All Rights Reserved.