Typically personal loans are structured as installment loans which, over a set time duration, can be paid off. Personal loans depend upon many factors, such as location, amount, as well as the lender and borrower. Depending on the lender and the state the individual resides in loans come in terms and amounts which vary to a large degree. Other types of personal loans come with an array of interest rates. The size and duration of the loan, as well as the borrower’s credit, all play factors in the specific interest rate, but in the end the lender sets the rate, and this is what it all amounts to.
In any case, the higher the credit score, the better the interest rates with prove to be. Starting at around 14 percent interest rates can climb to as high as 25 percent or more; it all depend on individual data and the type of loan being made. Loans are calculated as an Annual Percentage Rate (APR) and generally fixed for life, which differs from a credit card which usually varies. Some personal installment loans have variable interest rates, which seem the better deal upon first glance as they typically begin low. However, variable interest rates can sometimes prove to be dangerous, as a bank has the freedom to raise the amount. If the interest rates rise, one can be sure that the monthly payment will follow suit.
When finding a good place to take out a personal loan, you can search through a plethora of different outlets. Personal loans can be made from credit building groups, payday lenders, banks, and credit unions. Credit unions are typically the best way to go, as they are not-for-profit compared to banks. Credit unions can also be helpful even if you have poor credit, whereas many other lenders would turn down anyone with a bad score. Peer-to-peer lending groups are another viable option as it is easy to qualify; the biggest setback is the rates are somewhat high.
When you are looking around at organizations where you can get a loan, you should be sure to shop around and scout out interest rates. Compare options. Look at credit unions and other lenders versus banks, and see which one has the best deal for you. Also, ask yourself if a low interest credit card may be cheaper and more viable than a personal loan. For someone that has good credit you may not have to pay any interest at all on a credit card.
If you know someone who you trust well, and who has good credit, they can co-sign with you. This is another way to get better interest rates. You can also consider a secured loan to get lower interest rates, but you’ll just have to put down some collateral. Finally, before you apply for a personal loan, pay off as much credit card balance as possible. If you educate yourself in all of the methods and types of personal loans and carefully research your options to plan ahead, a personal loan may be able to benefit you in a positive way.