(ThyBlackMan.com) Are you in need of a loan to bridge the gap between your income and expenses? Most of us see the gap increasing day by day, so much so that the personal debt ceiling keeps getting higher and higher. While there are plenty of loans in the market, the most straightforward among them is the unsecured loan. It’s a loan type which is used for any purpose that you want and in most cases it is called an unsecured loan. This type of loan can be used for any purpose like you could use the proceeds to pay off higher interest rate or you can finance an adoption or make payments towards necessary funds. Here are few risks and challenges that you should be aware of before taking out best personal loans UK.
Risk #1: The rates of interest
You shouldn’t take the decision of taking out a personal loan only because of the fact that you qualify for it. While there are some personal loans which offer rates that are below 10%, there is some
other which can charge you 3-4 times higher. Your credit score is the main deciding factor behind your interest rates and lenders will charge you the rate that they want. Be watchful while you compare and contrast APRs as they can be often manipulated. Beware while choosing the loan.
Risk #2: Prepayment penalties
Does the lending institution allow the loan to be paid off before the actual repayment time or do they charge a penalty fee for pre-payment? What type of loan did you get? Is it peer-to-peer lending or via a bank or some other means? There will be some lenders who will be against paying off the loan early and if you think pre-payment is necessary for you, don’t forget to read the fine print before signing.
Risk #3: Hefty upfront fees
Did you check the amount that you have to pay in order to receive the amount of loan in your bank account? Just as it is true with a home loan, origination fees which the borrower has to pay upfront will usually differ widely.
Risk #4: Additional insurance
There are some personal loans which can offer you added insurance policy to safeguard the loan in an event of unexpected situations for the borrower which might bar him from repaying the loan on time. In case you wish to get insured for that time, speak to an agent and obtain a quote on disability insurance.
Therefore, it is seen that the consumers are not skilled enough and hence the loans are usually more favorable to the lenders and not the borrowers. Hence, make sure you know the risks so that you don’t fall into trouble in future.
Staff Writer; Larry Love