Is your salary not enough to cover all your financial obligations? If you need extra money, a low interest personal loan maybe the practical solution to your problem.
Personal loans have become a popular service among commercial banks and as long as you’re eligible and have the ability to pay, you can easily get approval and have your cash ready in as little as 7 days.
Before you sign up for a loan, however, you should do your homework and educate yourself on the essentials of personal loans.
Here are 5 things that you should know:
- A personal loan has a lower interest rates compared to credit cards
Most personal loans have an annual interest rate of 20%. This may sound a bit much, but not if you compare it to those of credit cards, which can charge you around 3.5% PER MONTH. It may look insignificant at first but remember that it can go as high as 42% a year if add it all up. This is why you should take advantage of the loan calculator provided by banks, so you can compare loans and their corresponding interest rates.
- It can be used for anything
You can use the money as you wish, but you have higher chances of approval if you give the impression that you will put it to practical use. Say you are planning to use the money for a vacation, it won’t exactly NOT get approved, but banks usually like hearing it’s for tuition, medical expenses, or home improvement projects instead.
- It’s a great way to build your credit
Some people avail of personal loans even if they don’t need one, if only to establish their credit history. This is a great alternative to credit cards because the interests are cheaper and the fees and payment terms are fixed. If you do good on your loan payments, it will reflect in your credit history and you can easily get approved for credit cards, housing loans, and car loans.
- You can pay it off in advance
There are banks who waive the pre-termination fee for those who want to settle their debts in advance. You can even ask for a lower total payment, which is subject to the bank’s approval.
- You can still get approved even without a bank account or credit card
Of course, having one or both greatly increases your chances of approval. But there are banks that can take a chance in those who want to get started with personal loans to build their credit history. However, you will be asked to open an account when your loan is approved, and they will deposit the loan proceeds there.
Now is the right time to get a personal loan since most banks are coming up with ways to attract new clients to their services. Shop around for the best deal so you can easily pay off your debt and establish good credit history.