If you have never applied for an unsecured loan before, and now find yourself in the position of having to do so, you may be feeling a little nervous. After all, an unsecured loan can be for thousands of dollars, with quite a few serious financial ramifications if you cannot pay it off on time or end up being late with payments.
That is why, before you apply for an unsecured loan, make sure you understand these five tips and then follow them.
Compare loan companies and their interest rates — The first thing you need to do when applying for an unsecured loan is to make sure you know which companies offer the lowest interest rates (see fd for a good example).
Interest rates are very important with unsecured loans, as many companies tend to charge very high rates. This can mean paying back thousands more dollars over the course of your loan, compared to a company offering low interest rates.
Compare interest rates across a few companies before you choose one for your unsecured loan.
Check on a loan company’s reputation — The next thing you need to do is to check on the reputation of the company you may apply to for an unsecured loan.
Reputations of financial companies vary wildly, and you do not want to be stuck with an unsecured loan from a company that has a terrible reputation for how it treats its customers.
Is it a fixed interest rate? — Be sure you only choose an unsecured loan from a company offering a fixed interest rate.
Some companies offer low interest rates at the beginning of an unsecured loan, but then increase them markedly after a few months. This can mean you only pay a four percent interest rate for three months, then suddenly find yourself paying 25 percent or more as the rate is increased.
Know if your interest rate is fixed and, if not, how much it will increase to before you apply for a loan.
Do they penalize you for early repayments? — You may want to take out an unsecured loan and then repay it much faster than the repayment term.
If this is you, be sure the company you get the unsecured loan from does not penalize its clients for repaying loans early. Some companies do, and this can be hundreds of dollars in a penalty fee that you will not want to pay.
Are their repayment terms easy for you? — Read about the loan’s repayment terms carefully before agreeing to the loan, and make sure they are appropriate for the situation.
Do they allow you to pay your monthly payments in a manner that is easy for you. For instance, via PayPal, a direct debit from your bank account or by mailing a check.
If they make things difficult when it comes to paying your monthly payment, there is a very good chance you will miss or be late with a payment. This is when high penalties will occur.