In general, credit cards should never be the first option for you when you are thinking of borrowing funds. It’s not that personal loans are much simpler, but they definitely offer you better rates. There is a fixed repayment term and fixed interest rate for all personal loans throughout the term of the loan and you can borrow the money in advance. There are now more believers of personal loans than of credit cards and experts believe that there should be a serious comeback of personal loans in the United States. It’s no wonder why people are gradually getting sick and tired of the complex process involved with credit cards and their hidden fees and charges. It’s best to avoid any and all traps associated with personal loans. This article will highlight three of those traps.
Trap #1: Insurance is often sold with the loan
We all prefer safeguarding our families and our loved ones from the unanticipated events and insurance is undoubtedly a great way of doing so. In the same way you plan ahead of time before taking on debt, you should do the same with insurance. There are, however, many vocal personal loan lenders who play the trick of including the insurance costs with their well-built sales pitch during the end of closing. The two of the most typical insurance policies that are added are unemployment insurance and life insurance. So, just ask them the cost for each month, the requirements for you to claim, and how much artsandhealth.ie/ventolin/ would they pay you and for how long.
Trap #2: Pre-calculated interest rate
In short, pre-calculated interest rates are a bad deal. This is a pretty complicated way of calculating the interest rate and the reason is to ensure that you pay more interest rate in the initial months or years of your loan term. In case you pay off your loan before the actual time, you will end up paying a huge interest rate than the rate which is required. If you get a loan with a three-year term, however, and you take the entire three years to repay the loan, then there wouldn’t be any difference between a pre-calculated interest and a normal rate loan.
Trap #3: Unnecessary origination fees
The majority of personal loans that are available charge you an origination fee and there is no real way in which you can avoid them. If you want to see whether or not you are getting a good deal, compare the APR of the loan and not just the interest rate. The APR will always include the origination fee and it will always assume that you don’t repay the loan before the actual time; just try to understand the fee and then compare the APR.
If you are about to take out an online personal loan or a conventional one, be aware of the traps and tricks so that you are not victimized by some shady lender.