Tired of the complexity, hidden fees, and temptations of credit cards? Personal loans offer a simple way to borrow money at much lower rates than credit cards.
Do you need cash or want to refinance existing debt at a lower rate? Nick helps you understand if a personal loan might be right for your financial situation.
Personal loans are simple. A bank lends you money for a fixed interest rate, with a fixed payment, over a fixed period of time. Loans offer certainty without the complexity and potential traps of credit cards. Not to mention they cost a lot less. It can be a great solution for people who need to borrow cash, have been burnt by credit cards, or have already used all balance transfer offers available. Unfortunately, banks don’t like to offer loans. Why? They make a lot more money on credit cards! Fortunately, P2P lenders are offering great loan products with lower interest rates and a great digital experience. Follow the guidelines below to get yourself a healthy loan.
6 things to know
Come prepared with documents to prove your income.
This typically includes paystubs, 1040s, and tax returns.
Make sure you compare APR, not just interest rate.
APR includes the cost of the origination fee, which can be a big part of the loan.
Start the process at LendingClub and Prosper.
Shop around. Applying won’t hurt your score at most lenders.
Origination fees are usually financed, so always apply for the amount you want to borrow + the fee.
So if the fee is 3% and you want to borrow $100, then apply for $103.
Make sure there is no pre-payment penalty.
If you pay off the entirety of the loan early to save money, don’t let the bank charge you.
Beware the sale of expensive add-on insurance, and the use of a “pre-computed interest” contracts.
These are basically tricks banks use to squeeze more money out of you. We break them down HERE.
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