A personal loan is usually unsecured and based on your income. Since they come with low-interest rates, you might feel tempted to get one. Here are a few things that you should know!
Credit score matters
The personal loan doesn’t include collateral, so this means that the credit score is very important to the lender. If you have a bad credit score, expect to get offers with higher interest rates.
If you have other debts, such as credit cards, a personal loan can help you pay them off. Personal loans come with lower interest rates compared to credit cards, car loans, or student loans. In this case, debt consolidation is more feasible. Before you do this, make sure that you won’t lose any benefits that come with the loan. For example, student loans come with benefits such as income-driven repayment. If you close your debt, you will lose the benefits connected to it.
Check for prepayment penalties
Many people will want to pay off their debt sooner, so they will get a second job to do it. If this is your intention, make sure to check the fine print and terms and conditions. Some lenders include prepayment penalties, which means that you ghetto pay a fine for paying off your debt earlier than the end date.