All You Need to Know about Consumer Loans

Tuesday, May 23, 2017
Posted by admin under Consumer Loans 

As the economy continues to improve, many people in Vermilion County area are looking to personal loans to meet their financial obligations. Personal loans, including consumer loans in Vermilion County, Illinois, and mortgages, are more helpful to the average consumer now then they have been in the past decade. If you find yourself looking for some financial assistance, here are some things you should be aware of before taking out a personal loan or before you start looking for a mortgage lender in Catlin Illinois. 

Interest Rate and Credit Rating

The first thing to understand when deciding whether a personal loan is right for you is that it's sometimes possible to get a better interest rate with a personal loan than with a credit card. Whether you qualify for a low interest rate personal loan is completely dependent on your credit score. Since the interest rate from loan to loan can vary so significantly, if you decide to take out a loan, it's important to shop around for the best rate. 

Additionally, most personal loans are treated as a fixed-term loan when your credit score is calculated, which is typically better for your credit than a revolving line of credit or credit card. Another thing to keep in mind is whether the interest rate is a fixed rate obligation or variable. If it's a fixed rate, the interest rate will remain the same for the life of the loan. Variable rates can fluctuate depending on how the rest of the economy is doing. Most personal loans are fixed rate, which means your payment won't fluctuate over the life of the loan.

Compare to Other Types of Borrowing

Although personal loan rates are often better than credit cards, it's difficult to say for certain which will be better for you until you’ve compared both products. Make sure you thoroughly explore all available options before taking out a personal loan. Although the interest rate is often very low on a personal loan, these types of obligations are unsecured debts, meaning that the bank does not require you to put your home or vehicle up as collateral if the loan defaults. This lack of backing, unlike a mortgage or secured vehicle loan, is riskier for the lender. If you have equity in your home or other assets, you may be able to get a lower rate on a loan than a personal loan.  If you think a personal loan will suit your needs better, you can often check out rates online to find the best deal available with your credit score.  

Origination Fees

You also need to understand what types of fees are associated with borrowing money through a personal loan. When shopping for a loan, it may seem like the only thing you need to be aware of is the interest rate, but unfortunately, this is simply not the case.  Most loans come with both an origination fee and an application fee.

Application fees are typically a few hundred dollars for most personal loans. There are some lenders that also impose a prepayment penalty, meaning that if you decide to pay your loan off faster, you're required to pay additional fees. Make sure to do thorough research on any potential additional fees you'll be obligated to pay before taking out a personal loan.

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