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4 Things to Consider Before Getting a Personal Loan

Updated: Dec 27, 2021

Personal loans are helpful because they allow you to borrow money for any reason. At the moment, you might want to renovate or furnish your new home, and a personal loan could help you do that. Other loans, like mortgages and auto loans, have limits on what you can use their money for.


A personal loan could help you renovate or furnish your new home, but before applying for one, you'll want to ask yourself some questions.


Personal loans are prevalent in the United States and other parts of the world. Here are four questions you need to ask yourself before applying for a personal loan.


1. Are You Willing to Pay the Interest Rate?


First of all, you'll have to decide whether you are willing to pay the interest rate. Some personal loans do come with lower interest rates, but you usually have to pay a higher interest rate upfront. You can determine how much you'll pay with a personal loan by dividing the annual interest rate by 12.


Also, consider your financial situation before taking out a loan. It's a good idea to get approved for loans that have the least amount of interest for your situation.


2. Are You Willing to Take on the Monthly Payments?


In addition to the interest rate, you'll have to decide whether you can afford the monthly payments. Some personal loans have lower interest rates but higher monthly payments. For example, a $10,000 loan at an interest rate of seven percent will have monthly payments of $331.34.


But if you borrowed $10,000 at an interest rate of 10%, then you would have monthly payments of $560.22. You'll have to decide whether you can afford the higher monthly payments.


3. Are You Willing to Pay an Origination Fee?


Some personal loans require you to pay an origination fee. If a personal loan has an annual interest rate of seven percent, then you'll have to pay an origination fee of two percent. If you borrowed $10,000, you'd pay an origination fee of $200.


4. How Does Your Credit Score Affect Your Chances of Approval?


It's important to remember that your credit score is also something to consider. For one thing, if you have a low credit score, you won't be eligible for the best personal loans.


You'll also have to remember that you should be getting the lowest interest rate possible. You'll probably qualify for a personal loan with an interest rate of ten percent.


But if you have a credit score of 800, you can qualify for a personal loan with a much lower interest rate. You can usually get a lower interest rate with a personal loan when you have a high credit score.


Conclusion


There are many loan options available to you, including personal loans. Before you apply for a personal loan, you should take some time to ask yourself the four questions listed above. You should also take the time to get a good idea of your credit score.


If you have a high credit score, you'll probably get a lower interest rate on a personal loan. But if you have a low credit score, you might not get an outstanding personal loan.


Stones River Credit is an installment loan company in Murfreesboro. We are not a title loan or payday loan office; we offer real installment loans paid overtime to our clients. Lending is our business and customer service is our ambition. We make fair, honest, straightforward loans and believe in the value of relationships–especially in times of need. Call us at (615) 896-5006 today if you need personal loans in Murfreesboro, TN.

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