Let us quickly tell you how awesome unsecured personal loans are. Such loans can be used to meet various personal expenditures including medical emergencies, weddings, vacations and home renovations. When the loan is unsecured, it simply means, the lending party has no resource to recoup their losses in case you fail to make the payments on time.
However, if you think, there are no consequences in case you fail to repay an unsecured loan you are dead wrong. Since the process poses a greater risk for the lenders the collection of defaulting payments cannot be classified as pleasant. Your credit record will plummet overnight and you might find some not-so-pleasant “collection parties” at your doorstep.
Unsecured personal loans do not have any mortgages; hence a good credit score is absolutely desirable. If your credit score is lower than 640-660, you can be paying as much as 36 percent APR. Finding the right unsecured personal loan is both challenging and time-consuming. Let us introduce you to the basic strategies of finding the loan you need at the moment:
i. Window shop till you drop –just like the way you checked out a hundred cars before choosing one that fit your bill,you will need to shop around to spot the loan that meets all your requirements. If you have an outstanding credit score you might even consider treating a credit card (0% APR) as personal loan. You must remember to pay off your dues before the low interest rate expires which is typically about 15 – 18 months.
ii. Dig around for hidden fees –while many registered companies and banks give out unsecured loans, they keep origination fees and prepayment fees under wraps. Standing face to face with more dues at the end of the month is not a pleasant experience for someone on a budget. We suggest you talk to your potential lending party directly to find out about the fees associated with your loan. An origination fee can vary between 1% and 5% and a defaulter’s fee can be as much as 5% of your outstanding balance if you lack the necessary bargaining skills.
iii. What is the right term for you?
There are many online lenders who will let you choose between 3 year and 5 year terms. The months determine how much interest you pay throughout the lifetime of the loan. Although most of us go for the longer terms as this makes the monthly payments more manageable, it actually means we end up paying more in the end.
iv. How to steer clear of unsecured loan scams?
Here are a few steps to ensure you that your potential loan company is legitimate:
You should be contacting them first and not the other way around.
You shouldn’t have to pay any fees for loan application.
The lender’s address, business ID and client list should be verifiable.
You must remember that even though the lending party may seem outwardly benevolent for offering your unsecured loans, you should be the one in control. Even though unsecure, you are a customer and the company/bank/party will be enjoying interest against the amount they are lending.
Author Bio: Britta Healey is an online loan expert. She has been guiding thousands towards finding the right unsecured personal loans. She has a great collection of articles that will help you steer clear of online scams and unscrupulous unsecured loans.