In today’s day and age, it’s easier than ever before for consumers to gain access to financial products and services. Services including credit cards, automotive financing, and personal loans offer consumers convenience to purchase the things they want with ease.
Using these financial services with care and responsibility help keep your account in good standing with your creditors.
If you are thinking about taking out a personal loan, it’s important to understand the potential pitfalls of the service. Here are tips on what you can do to avoid falling into them!
Know Your Credit Score
As a general rule, it is always an excellent idea to know what your Credit Score is before applying for any personal loan or related credit product or service. By finding out this information before submitting an application or talking with a loan officer, you get a better idea of whether your application will get approved and the rates you can expect.
The higher your credit score, the more likely you are to qualify for better rates and terms.
If your credit has some blemishes, this doesn’t automatically disqualify you from getting personal loans. However, the chances are good that your loan will have less favorable terms with higher interest rates or more installment payments. Both of these factors make the overall cost of borrowing more expensive.
As you can imagine, even a 1% difference can make a difference in your finances. If you aren’t in a tight spot, consider taking steps to repair your credit and improve your credit profile. By doing so, you’re making moves to qualify for more favorable lending terms.
You can improve your ‘debt to income ratio‘ by paying off existing debts, by adding income or using a combination of both approaches. The more money that you make and fewer obligations you have, the better your chances for loan approval.
If your credit report has inaccurate information, getting this data removed from your profile is helpful. Inaccurate or collection accounts are negative connotations that lower your score. These days, consumers can check their credit reports online and file disputes directly with the reporting agency. Questionable accounts that don’t get verified by the original creditors get removed, offering an instant boost to your corresponding credit score and borrower profile.
Understand the Terms Of The Loan
The time to figure out the terms of your personal loan isn’t the day before your first payment is due. Be sure to understand the total cost of your borrowing to avoid complications and misunderstandings. You can calculate the total cost of the credit by taking the amount you borrow and adding processing fees and interest to it.
For example, let’s say you want a $10,000 loan and the Interest Rate is 7.5% which is equal to $750.00.
The total cost of this loan, not including any other fees will cost a total of $10,750.
The good news is that consumers who borrow do have the option to reduce their interest liabilities.
One way to do this is by paying more than the minimum amount due on the original principal of $10,000. Since the amount of the principal gets deducted from the original balance, this also helps to reduce the number of payments needed to repay the balance.
On the other hand, if you miss payments or make late payments, penalties add more fees and cost to your balance. Setting up automatic payments helps assure that you never lose track of a scheduled remittance, keeping your account in good standing.
Further, this prevents your financial institution from placing a late payment entry on your credit report. Late payments are the most damaging remarks to have on your credit profile. In some cases, a late remittance to one lender noted on your credit report can result in unrelated lenders raising their interest rates as well.
What You Need to Know About Loans
All loans, whether with Gladiator Lending or another institution, are a financial contract. You’re expected to pay back all of the money you borrow, including interest and fees. Failure to keep your payment schedule can result in bill collectors calling you, collection accounts, and in worst case scenarios, legal action being taken against you.
The more informed you are as a consumer, the more empowered you are to make the right financial decision for yourself and your family.
When searching for a loan, be sure to check with larger banking institutions, local banks, and newer lenders like Gladiator Lending to secure the funds you need for personal use. Terms and conditions can vary from lender to lender, based on a variety of factors. Taking time to research rates, terms, and conditions before filling out your loan application form can help you save considerable amounts of money over the long run.
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