Personal loans are a financial resource that a bank or lender can offer you under certain conditions. In this type of contract we find the client (who is called the borrower ) and the party that is going to lend us the money (which is the lending party ). The delivery of a certain amount of money is agreed in exchange for a series of interests (which are the installments ) in a certain time ( repayment period ).
Loans can be an effective solution when we need money immediately; however, taking into account the interest to be assumed, it is only recommended that they be considered as a last resort .
Without further delay, we have prepared a series of tips so that you can request money through these loans without having any problems.
Contenidos
The best tips for choosing personal loans:
1. Calculate exactly how much money you need
Until recently, it was common for lenders to offer you more money than you actually needed when applying for personal loans . And this sounded attractive because, after all… Who wouldn’t want to have more money?
However, the problem with a high loan is that it will also have higher interest rates, making repayment more difficult.
Quick loans have precisely this particularity: they are fast. However, given this high speed, it is possible that you overlook the conditions and that you only begin to notice their effects when it is too late.
You need to calculate the interest before you borrow the money. If you increase the amount you borrow, you will need to calculate it again.
Fortunately, online simulators do everything for you, so that you have the information in a more accessible way.
2. Reduces the repayment period
Another key to applying for personal loans and not regretting it is to choose a repayment period that is as short as possible . Keep in mind that the lender will want to offer you a longer term with the premise that it will be more comfortable for you to assume it. Although they are not wrong, they will also earn more with the interest they will charge you.
To calculate the repayment period for a personal loan, you will need to consider your income and expenses . By making the relevant calculations, you will need to ensure that you are able to meet the monthly payment.
Once you have some figures, it is time to reduce the repayment period as much as possible, so that you can pay it back as soon as possible.
On the other hand, many personal loan entities give you the option of accessing early repayment (this can be total or partial, depending on whether we advance an amount of money to repay one or several installments, or if we fully satisfy the personal loan).
This may be interesting to get rid of the debt as soon as possible… but you will have to analyze the conditions : it is possible that they will charge you commissions for doing it, and these may be somewhat high.
3. Beware of delays
One of the conditions that will be discussed in more detail in the contract for the best personal loans are those related to delays . It is crucial that you have the financial capacity to assume the installment you have chosen, month by month. If you are late in the deal, even if it is only one day, it will cost you quite a lot.
The entity may apply what is known as late payment interest . One of the main characteristics of this type of interest is that it is usually higher than conventional interest.
If the situation worsens and you are unable to pay the remaining installments, the debt will continue to increase. This could reach the point where the bank could seize your accounts, and even your assets.
Therefore, when applying for personal loans we must make a series of considerations, but one of the most important is to be clear that we can pay it and that we will be able to pay the monthly installment.
4. Be clear about the requirements for the loan
Online loans can help you get money sooner than you think, but you will also have to meet a number of requirements. They are usually lower than those required for conventional loans, but they must also be met.
If you study them in advance you can save a lot of time.
In addition to asking you for a document proving your identity, the entity will ask you for a guarantee to show that you can repay the money ; normally, they usually ask for a pay slip and an employment contract .
Self-employed workers can also apply for the money, but they will have to provide certain documents such as professional registration, VAT or personal income tax declaration, invoices and other documents.
You may also have to justify the expense : that is, you must tell the lender the reason why you are going to ask for the loan and the use you are going to give it.
5. Don’t sign without knowing exactly how much you are going to pay
In addition to all the above advice, to apply for a personal loan you must be very clear about how much you are going to pay ( initial amount + interest ). To do this, the most important thing is to look at the APR or the Annual Percentage Rate .
This is a percentage that includes the total cost of the loan (which includes interest, commissions, expenses, as well as any other type of criteria).
Conclusion
Once you have all these criteria clear, it is essential to compare different personal loans to choose the one that suits your needs. You may be able to find a one-off offer for lower-than-usual interest rates.
