The market of financial products is very developed, and today lenders offer a wide variety of arrangements for everyone’s needs. However, personal loans are still the most sought-after because these funds can be used for any purpose, starting from car repair and traveling to home renovation and buying new furniture.
The conditions under which you borrow money differ from case to case, and what makes the difference are the loan type, the amount you plan to borrow, and your creditworthiness. The better your credit score, the more options you have. So if you’re on a quest for up to several tens of thousands of dollars, you can almost surely get them through an unsecured loan.
Unsecured loans are all short-term arrangements granted to borrowers with relatively good credit scores. These arrangements don’t require collateral, so they carry a higher default risk. But the assumption is that creditworthy borrowers won’t fail to repay the debt, so they have the best chance of being approved for unsecured loans.
If you’re looking for an unsecured loan, you should know how to choose the best offer. Lenders offer different arrangements for different consumers, and if a good credit score is something you can boast about, you have the chance to borrow money under more favorable terms. But before that, you have to sammenlign forbrukslån using information from different lenders.
Know the Costs of Borrowing Money
Taking a loan is a simple and fast way to get cash. It’s faster than saving money or finding an extra source of income. However, that perk of convenience comes with a price tag. Each loan carries certain costs that you, as the borrower, agree to. In that way, you pay the lender for the service it provides, i.e., lending money.
Interest is the main expense in the overall loan cost, but apart from it, there are also various fees. Interest is a percentage of the borrowed amount, which you will return along with the principal, as compensation for the lender’s service. As for fees, these can be approval and processing costs, early repayment costs, closing costs, etc.
When comparing unsecured loans, you should look at their annual percentage rates (APRs). These are parameters that combine fees and interest on an annual basis and show which offer is the most favorable. Of course, to make an apple-to-apple comparison, always use APRs for the same amount from several lenders.
The next thing you should compare is the installments. They directly depend on the APR, but that doesn’t always mean the loans with the lowest APR are the best solution for you. That’s because both the repayment term and your financial goals affect the decision of whether to borrow money or not.
Of course, the shorter this period is, the higher your installment will be, and vice versa – for extended repayment periods, you’ll pay less every month. So if the latter is a viable option for you, you’ll opt for a longer repayment term. If, on the other hand, you think long-term and want to save over the loan lifetime, you’ll decide on shorter tenure because you will thus pay less interest.
In any case, the monthly installment must fit into your budget and not burden it too much. To prevent this from happening, lenders look at the current debt compared to your income (DTI ratio) when approving a loan. It shouldn’t be more than 40%; otherwise, your application will likely be rejected, or your loan will be approved under much stricter conditions.
Repayment Flexibility during Hardship
When you take out a loan, it’s your obligation to pay it back plus interest within a certain period. You make that repayment in monthly installments calculated based on the APR. These payments are made on the same day every month, usually on the day of your salary. But you should always think in advance – what if you’re payday comes later?
So you have to check how flexible the lenders are regarding your installments. Some will accept to change the due dates or allow you to skip or pause the payment, especially if you take out a loan with a tenure of several years. In general, you have to compare the lenders’ options for clients experiencing current hardships.
Simply, you never know what can happen that can hinder you from repaying the debt. And if the lenders aren’t already flexible enough to grant you the concession of pausing the repayment or moving the due date from time to time, compare their fees for late repayment.
Lenders must be flexible at any time. So you should know what to expect when things get better for you. For instance, you can welcome some favorable moments that improve your financial situation – a raise, promotion, inheritance, or simply a favorable refinancing deal. All these give you the opportunity to pay off your current debt as soon as possible.
See the following page to understand when to refinance:
Settling your loan before the due date is known as early exit, and most lenders offer this option. But that concession isn’t free, at least not always. By paying off the loan earlier, you directly deprive the lender of the expected interest income. So in order to compensate for that loss, they charge an early exit fee or prepayment penalty.
This fee can significantly affect the overall loan cost. It can be anywhere from 1 to 5% of the remaining debt. But you can find lenders who don’t charge an early repayment fee. This information is enough to compare the loan offers and estimate whether early repayment is worth it at all.
Lenders don’t give out loans just like that. Instead, they have a specific set of requirements that applicants must meet in order to be considered at all. These are some general requirements related to the applicant’s age, residence, employment, and income, but there are also some specific conditions that lenders determine independently.
For example, some lenders may require a minimum annual income to grant you an unsecured consumer loan. Still, others only want to work with candidates who have a credit score over 750. In any case, you must check whether you meet the eligibility criteria before you even apply.
If two lenders have the same eligibility requirements, you’ll choose the one that offers more favorable loans. If the lenders don’t have the same requirements, you will agree to the offer for which you’re eligible, although it may not be more favorable. That means you’ll sometimes have to make certain concessions.
For example, if you want to borrow money and your credit score is not good, you’ll be eligible only for loans with higher interest rates. In such situations, it’s important to consider what benefits you more – agreeing to not-so-favorable conditions and getting the money fast or improving your credit score, then looking for a more favorable loan.
Application Processing Speed and Availability of Funds
When you plan to borrow money from banks or traditional lenders, you do so with the intention of getting it as soon as possible. That’s why the lender’s efficiency and the time it takes for the funds to be in your account are of great importance.
So you must check this information through some unbiased reviews. Sometimes, lenders can make pompous claims to attract clients, but these are far from the truth, like when they advertise instant payments or guaranteed approval. In order not to fall for marketing tricks, you should know what they’re about.
Instant approval doesn’t mean you’ll get the money in just a few minutes. Simply, lenders need some time to process your application, so in the best case, the funds will be available in a few hours. But in most cases, transactions can take days, depending on the bank.
Also, guaranteed loan approval isn’t possible, although some lenders claim they’ll give out money no matter what. Before accepting any of these, be sure to read the fine print. It’s possible to get cash even if you have a bad credit score, but these arrangements usually come with high interest and strict lending terms.
Comparing different loans can make or break your decision to borrow money this way. Sometimes, you might have to accept the less favorable offer, but whenever you can, try to find the best deal that meets your needs and budget without compromising your finances and credit score.