Personal loans can be helpful during financially challenging months. We’ve all faced tough months when unexpected expenses arise, causing havoc to our budgets. Personal loans can be ideal in such instances, providing access to cash when you need it most.
It’s important to find personal loan lenders that can provide access to financial solutions designed to meet your unique needs. Equally important is finding personal loan lenders with a good reputation.
Some potential pitfalls of personal loan lenders:
Long repayment terms
Personal loan lenders may convince you to drag the loan out for longer, in order to reduce monthly payments. This may seem like the best deal to you, but the reality is that this just means that they will earn more money in the long run. If you want to avoid paying more overall, make sure that you take a small loan amount for a short period of time.
Offering variable loan rates
Most personal loans have fixed interest rates. Some lenders may offer you variable loan rates, which may end up costing you more when interest rates rise when least expected. Some personal loan lenders may take advantage of individuals without a clear understanding of how loan interest rates work.
Prepayment penalties
Some personal loan lenders charge extra if borrowers want to repay the whole loan early.
Lack of privacy
Some lenders may not be completely transparent about their privacy policy. They may share your information to third parties in order to capitalise on commission. Make sure that you read and fully understand the privacy policy.
Placing too much emphasis on annual percentage rates
As opposed to comparing the annual percentage rate (APR) of the loan, the Total Amount Repayable gives a better idea of how much you will be repaying. This amount reflects interest and charges you will pay. Some personal loan lenders may place too much emphasis on the APR, which can be misleading.
