Personal loans, especially those provided via the internet, are undeniably more convenient than bank products. No longer do you have to visit an office and wait in line to speak to the manager. Nevertheless, this service has its own caveats that every client must be aware of. These five rules are essential, as they make sure your choice of the loan and lender is right. 

The opportunity to receive money immediately, without leaving the comfort of one’s home is enticing to many. What these applicants should understand is that any form of borrowed capital comes at a price. And this price must be crystal clear from the outset. 

How long?

Before filling in the application, analyze your current budget. What is the biggest fixed monthly payment you can afford? How long would you like your obligation to last? Remember that you can always repay the debt faster, so there is less interest accumulated.

The document signed between you and the institution explicitly states the term — i.e., the period over which the gradual repayment will be made. Commonly, it varies between 6 and 48 months. However, the offer you get depends on the exact lender and your individual case. 

How to repay?

More companies are stepping in to help their workers with a much cheaper way to get some emergency cash than payday loans.

Aside from the term, there are other crucial factors. Each of the agreed monthly repayments must be done by a certain date, and this date is also stated clearly. The method must also be specified. This could be auto-withdrawal from your account, in which case you only need to ensure the balance is sufficient. 

How much does it cost?

Remember that lending is not charity. The service comes at a price, and this price is referred to as interest. In the contract, you could see the figure in the form of the annual percentage rate. This shows how much extra you will pay over 12 months. 

If, however, you are only borrowing for half a year, divide the amount by two. The same logic applies to any other period. For example, for $20,000 paid back over 12 months with APR of 24, the total interest will be $4,800 unless the debt is fully covered sooner. 

Prepayment terms

This refers to the desirable situation in which the borrower decides to repay the debt before the due date arrives. This could be done either partially or in full. Considering the interest rate mechanics, this brings down the overall cost of borrowing. This also explains why some institutions will charge special fees. Make sure any such charges are clearly announced. This applies to any additional fees in general. Everything must be put on paper.

Non-fulfillment of obligations

The document will also determine the course of action taken by the lender if you fail to meet your obligations. Nobody is protected from financial emergencies. Falling behind on payments typically results in extra fees, and if repayment is not resumed, the lender could resort to more serious measures.

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