A personal loan brings on some certain risks – risks that you need to understand before you agree to the loan. What should be aware of before you apply for a loan and are approved?
Taking Out More Than You Should
Many lenders may push you into getting a bigger loan than you need but this is a tactic that helps only them. Make sure to focus on just the amount you need and ask for that. Remember, the bigger the loan, the higher the monthly payment.
You may be approved for a personal loan but is the interest rate fair for you. There are many personal loans that have a 10 percent or less interest rate while others may charge you three times that much. The interest rate you are given is usually dependent on your credit score.
Drop In Credit Score
Anytime you get something new added to your credit score, your score takes a hit. A personal loan could decrease your rate by nearly 50 points, which makes it harder to get more credit later on. If you need quick cash, you could be in a bind later on.
Early Payoff Fee
It’s great that you have the money to pay off the loan faster, but you could have an early payoff penalty or be charged a fee to pay the loan off early. Some lenders are fine with you paying off the loan early but make sure to read the fine print to ensure you don’t have an early payoff fee.
Not Reading The Fine Print
The worst thing you can do is not read the fine print of the contract you are going to sign. If a lender pressures you to sign the contract, find another lender to do business with. Rushing the process means overlooking some important information such as fees.