THINGS TO CONSIDER WHEN TAKING PRIVATE LOANS
Private loans can be offered with or without security or collateral and may involve lending a property or cash. Most people use private loans for travels, emergencies, weddings, and debt consolidation. Although these types of loans carry a higher interest rate for borrowers, they are easier and quicker to get. Applicants do not have to undergo complicated application procedures to take them.
Here are things to consider before or when applying for a private loan.
1. THE RATE OF INTEREST
Most people do not even look at the rate of interest when taking these loans despite most having a high interest rate. The benefit of looking for the interest rate is that you apply for a loan with a manageable interest rate and leave those that are not.
This is important especially if a loan is secured as that could lead to loss of the property. Even if no property was secured, you still end up paying more in terms of repayment.
2. LOAN TERMS
The term of loan is the duration before repaying. Most private loans allow borrowers to repay the money over a short duration. For instance, there are day private loans. By looking at the duration of payment, you get to manage expenses so as not to miss out on repayment. Most creditors also increase the rate of interest or charge penalties when deadlines are missed. Some borrowers allow you to repay in smaller amounts, which reduces the burden slowly while allowing you to meet other expenses.
3. FEES ASSOCIATED WITH THE LOAN
Some lenders charge fees before applying for a loan. The establishment fee, as it is called, varies from one lender to another. It is advisable to borrow from those who do not charge any establishment fees. Otherwise, others charge servicing fees, early exit fees, insurance fee, and withdrawal fees.
4. YOUR REPAYMENT PLAN
Unfortunately, most people do not lay out a repayment plan when taking these loans. This leads to defaulting repayment. A repayment plan starts by understanding how much your income is and if it fulfills the demands of the loan. Other factors to consider when laying out a repayment plan are the duration of the loan, and whether small repayments are acceptable. Having a repayment plan helps you not to miss the deadline, but most importantly it helps to take a loan with a manageable deadline.
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