Unsecured personal loans are although fast to get, but before applying for an unsecured personal loan, it is essential to learn about it .One should continuously monitor his/her credit score. It is advisable to improve the credit ratings and check for any inaccuracies before applying for such a loan as a rejection can amount to further decrease in credit rating points. Doing a comparative studies of the lenders can give us more insight about the various aspects of the loan. Excellent credit score is entertained by major lenders, but it is best to go for online loans for a person with poor or low credit ratings. Other than credit ratings the lender mostly asks for proof of identity, confirmation of present residential address (with copies of recent utility bills), recent pay statements among others. One must be careful to keep in mind the debt to income ratio as it will directly affect their future credit score. It is a ratio of the present income to the amount of debt. It is advisable to discuss all the repayment options available with the lenders. For such loans, going for balloon payments is preferable if the current monthly income is low. Here the lump sum (principal and all accrued interest) is paid after the tenure of the loan all at a time.
Pointers you should know
Although loans give an interim relief, it can prove to be a burden in the long run. Unsecured loans seems to be very attractive but the lenders of such loans has got numerous ways to extract a good amount of money from the buyers .In order to avoid further trouble , it’s always better to check certain facts before going for such loan.
Consider taking small and short loans: Many lenders try to convince their clients to avail bigger and long term loans where one has to pay less monthly installments. This can prove very costly for the borrower as one ends up paying more money in the name of interests. Such temptations must be avoided and it’s always better to go for short term loans which although seems tough but costs less on your pockets.
Check the total amount payable (TAR): TAR mostly includes the interest and other charges one pays from the first to the last installment and must be used as the base while doing a comparison because the standard way of cost comparison (APR) annual percentage rate can be easily manipulated by the lenders. It is important to check if the TAR includes the origination fee.
Check the alternatives: It is always advisable to check for any better alternatives available other than unsecured loans as it is possible one may strike a better deal. In case of unsecured loans banks are likely to charge more from their existing customer. So it’s better to do research to avail a competitive rate.