A personal loan is a type of loan that offers flexibility and convenience, which will help you to meet your financial needs. Unlike other loan types like a car loan, a personal loan is unsecured, which means that you are not required to use any of your assets as collateral in order to guarantee the loan.
There are a number of lenders that offer personal loans, which can then make it confusing and challenging to decide which lender you will use, if they are reputable and if the personal loan they are offering is a good one.
Before you start applying for a personal loan, take a look at these 5 characteristics of a good personal loan.
5 Characteristics of a Good Personal Loan
The Interest Rate is Not Obscene
The interest rate that is charged by lenders will depend on the current market rate, but it is also influenced by your credit score. If you have a good credit score, then you will find that you will receive a better rate. If you have bad credit, then you are able to take steps to improve this before you take a personal loan.
A good personal loan is one that has a fair rate that is within the prescribed rate. If the interest rate is high, then you should look somewhere else as a high interest rate could leave you in more debt.
You will then need to check the rates of lenders and determine who is charging a good rate based on the market and your credit score.
Your Terms Have Flex
The fact is that lenders want and have to be paid no matter what type of loan you take., The difference though between a good and a bad loan is the payment options that lenders offer.
A personal loan should offer an automatic debit facility for convenience, so that you always pay your loan on time. If an automatic debit order is not available, then other convenient options should be offered that are accessible like a bank deposit or an over the counter payment.
Not only should the repayment be convenient, the personal loan terms should also be flexible. This is the amount of time that you are given to repay the loan and interest in full. The term should give you enough time and is based on your capacity to pay the loan on time.
Don’t go just yet…keep reading to make sure you find a good personal loan…
It is What You Need
A personal loan can be used how you like, so there are no restrictions on it. You will need to analyse your needs and ensure that a personal loan is the right option for you and matches your specific needs. Getting the right loan is important depending on the financial situation you are addressing. A good loan will then benefit you and your situation.
Extra Costs? Are They Hiding?
There are lenders that will charge a processing fee, an application fee, an early termination fee and so on and these fees can be hidden. On the other hand, there are lenders that are upfront and honest about any charges or fees they have and they might be willing to waive some fees.
A good personal loan will be transparent about any fees or charges, so you know exactly what you are paying and where your money is going.
The Requirements Can Be Minimal
Personal loans can be hard to get due to the lender taking on more of a risk as you not putting up any collateral to secure the loan, which the lender would be able to seize if you fail to repay the loan.
However, as there is no collateral involved, you will have fewer documents to fill in, but the list of requirements can still be quite long, which makes the application process quite tedious.
That being said there are good personal loans that will only require the minimal requirements, you will often find this with online loan lenders. They will generally only ask for your ID, a recent payslip, bank account information and some personal details.
When you are applying for a personal loan, you should keep these characteristics in mind and to also do your research on any lender to make sure that you are getting a good personal loan from a reputable lender.