A personal loan is an unsecured loan aimed at funding unforeseen and planned expenses. You might get a high-interest-rate deal as they are not subject to collateral. In case of a bad credit rating, they will be even higher.
Regardless of your credit score, you would like to get the best deal to save your money on interest.
“Finding the right type of a loan is not a cinch as there are a lot of factors to look at before making a decision.”
Moreover, you cannot access all the elements, such as the actual interest rates you will be charged, unless you formally put in the request for the loan. Yet, doing your homework is extremely crucial. Here are some of the tips for a comparison between various personal loans from different direct lenders.
Get quotes from multiple lenders
Although there are various online comparing personal loan websites, they could be more reliable. Instead, you should get quotes from multiple direct lenders. You should approach a minimum of three lenders.
There may be a major variation in the interest rate, repayment length, fees, and processing time. However, you will not be able to get to know the actual rates and fees as they are all decided after an affordability check.
At this stage, a lender will run a soft credit search on your credit report, so they cannot access information about previous defaults. They will not ask you to present concrete evidence to prove your income at this stage. They can offer you a quote based on the financial details you tell them in the application form.
The actual interest rates will likely be higher from the quote you get, as they are decided after a thorough check of your credit report and repaying capacity. However, you will still benefit from getting quotes. After submitting your loan application, you can see which lender will likely offer you the most affordable interest rates.
Make sure you are on the right track while comparing
“While comparing loans from different lenders, you must ensure that interest rates and repayment terms are similar.”
For instance, “if a lender offers you a longer repayment term, you will be able to manage it because of smaller monthly payments, but it will cost you a lot of money.”
Another thing you should consider is the interest rate. Some lenders offer personal loans at fixed interest rates, which means monthly payments will remain fixed throughout the loan term. However, others might offer you variable interest rates that keep changing as the base rate changes.
“Variable interest rates are riskier than fixed interest rates even though they seem cheaper on the surface.” The total cost of the loan will go up when the rate of interest increases. It will make your debt more expensive.
“You should compare between fixed-rate lenders if you are looking to get a fixed interest-rate deal and variable-rate lenders when you are looking to get a variable-interest-rate deal.”
Remember to assess fees.
The interest rate and the APR are two different things. The former is part of the latter. The APR is always higher than the actual interest rate as it involves processing, monthly, and upfront fees. You should straightaway ask lenders about the fee structure.
Getting information about fees from lenders is difficult, but you should still try to get some idea. Early repayment fees and late payment fees do not involve in APR. You will be imposed early repayment fees when you pay off the debt before the due date. This is because a lender will try to offset the loss of interest.
Late payment fees can quickly add up the debt and may vary from lender to lender. Remember to ask about any other kinds of financial penalties.
What should you do after applying for a personal loan?
If you have decided to take out Greenwoods personal loans, the next step is to figure out what you need to do later.
Read the small print
After the approval of a personal loan, you will receive an agreement to sign and submit. So, a lender can transfer funds to your bank account. Read all terms and conditions carefully. There are a few things that only lenders will tell you after getting the loan.
Ask your lender to explain the meaning if you do not understand the term. In the scenario of a missed repayment, you will have to pay late payment fees or default fees. A lender may impose interest on the fees as well. This is what they might not tell you when you get the quote.
Knowing all these things beforehand will help you make a better decision.
Take advantage of a cooling-off period
Personal loans are not small loans, so a lender will give you a 14-day cooling-off period. This is the occasion when you can change your mind. Think carefully after reading all terms and conditions of the contract. Experts say, “You do not need to sign the contract if you do not wish to proceed.”
It is crucial to remember that you cannot back out once you have got money in your bank account.
Take advantage of the cooling-off period so you do not rue the day.
The final word
Personal loans can be expensive as they are subject to high-interest rates, so it is crucial to compare them carefully. Get quotes from multiple lenders and make sure you are comparing apples to apples.
You cannot just jump to a conclusion based on the interest rates. You will need to see the repayment length and fee structure as well. Read the fine print because crucial information is often given in smaller font that may work against you if you need more clarification.
Think carefully during a cooling-off period if all terms and conditions suit your current financial condition.
Emma Anderson is a highly accomplished Editor-in-Chief at 24cashfinances, renowned for her exceptional expertise in the finance industry. Holding degrees in Finance and Marketing, Emma has developed a deep understanding of the financial landscape, particularly when it comes to loans and personal finance.
Emma’s professional journey began as a financial analyst, where she gained hands-on experience in evaluating market trends and analysing investment opportunities. Emma’s enthusiasm for writing and her goal to educate and give individuals a voice motivated her to move into financial journalism. Her work has been published in popular magazines and she has produced thought-provoking pieces on various financial topics.