When used properly, personal loans are a great way to meet any funding shortfall that you may have. That is to say, forget about using them to pay for holidays or whatnot.
Funding luxuries are not the best way to use a personal loan. But if you have a genuine need to borrow $10,000, or an amount that a credit card is just not going to cover, then a personal loan is the product for you.
Here are three tips when shopping for a personal loan
If you’re financial need is less than $5000, then a personal loan is not the way to go.
For small sums of money, then credit cards are likely to be your best bet. There are a couple of ways you can finance using a credit card. The first is using a zero per cent purchase card, or alternatively you can spend the money on an existing credit card, and transfer the debt to a zero percent balance transfer card, and that will enable you to money for a small fee and pay no interest.
When shopping for a loan, the Annual Percentage Rate (APR) is not the only thing you should be looking at, and you should also take not of the Total Amount Repayable or TAR.
Knowing what your TAR is on an amount your borrow is the best way of being 100 per cent certain how much the loan is going to cost and what you need to pay over the lifetime of the loan.
The TAR incorporates any interest payable as well as non option fees incurred. So really it is the best measure of understanding how expensive the loan is, and an invaluable tool when trying to compare deals.
When you do need to borrow money, it is important to borrow as little cash as you can possibly manage, and do so over as short a time as is humanely possible. Doing that will ensure you keep your interest costs as low as they can be.
Borrowing more than you need has absolutely no utility, and it is likely you will end up spending the loan on something you don’t need resulting in you carrying debt for longer than you have to, and paying more for the privilege than you need to.