How to be safe while taking a personal loan

It is not hard to get a personal loan and one does not even have to provide a specific reason to his or her lender while borrowing the money. This borrowed money can be used for absolutely anything, say a wedding or purchasing an expensive product. It is for the borrower to decide if he or she really needs to take a loan for meeting the particular expense. Personal loans are unsecured loan, which is why one does not have to provide collateral in order to get it.

Our financial decisions have a lot of impact in our daily lives and it is good to be safe when dealing with loans in particular. Below are some steps which a person can follow in order to be safe –

• Small time frame – Try to take a loan for a smaller time frame as it will help you get rid of the debt faster. There are some lenders who might ask you to extend the time in order to reduce your monthly payments, but it is an illusion. Clearing off your debt faster will ensure that you pay less interest on your debt and also live in peace.

• Fixed rate of interest – A fixed rate of interest means that your interest will be the same during your loan tenure. Fixed interest rate equals to fixed monthly payments, thus you will know the amount you have to pay for the loan every month and it will help you plan your finances well in advance.

• Compare the total amount – While looking for personal loans, do not just find the amount you have to pay monthly or annually, figure out how much you have to repay in total. This total amount includes the rate of interest and other charges that you have to pay. Compare the total amount when you compare loans in order to get the best deal.

• Don’t look solely at the cost – Cost is an important factor but not the only one, there are other benefits that banks provide you when you apply for a personal loan with them. For example – Some banks do not charge prepayment fees when you repay your loan earlier than the period for which you took it. Look for such benefits when you select a loan.

• Read the fine print – Before applying for a particular personal loan, read its fine print in order to make yourself aware of the various fees and charges associated with it. It will save you from surprises in the future.

• Look for other options – You should give a thought to the other options that are available. See if you can buy the product using your credit card or save up money and then buy it later. You can also opt for loans from peer-to-peer lending sites. Opt for a loan only if you really need it.

• Read the Privacy Policy – Make yourself aware with the privacy policy when you apply for a personal loan.

• Understand the terms – Understand all the terms and conditions of the personal loan you plan to apply for. You must know about the costs and penalties before you take the money.

Following the above points will help you in selecting a good personal loan and at the same time prevent it from becoming a burden for you.