It can be very tempting to just simply sign the papers on a loan when you come across a cheap loan that sounds too good to be true. Unfortunately, sometimes, these loans are too good to be true and people end up being taken for more money and get in worse financial trouble. If you think you have found one of the cheapest unsecured loans, then you need to make sure you check a few things out first before you sign those papers.
A Look at Unsecured Loans
Before you can go about finding a cheap unsecured loan, you need to know exactly what an unsecured loan is. This type of loan is given to people without having to put up some sort of collateral or equity behind the loan. The loan is based off income as well as the person’s credit score and report. Most of the time an unsecured loan has a higher interest rate than a secured one since they don’t have the promise of payment with the collateral.
3 Things to know before you Sign the Agreement
Make sure that you know what the interest rate of the loan is. There are some loans that have variable interest rates or balloon interest rates that may go up after a certain period of time. It is very possible that your cheap loan could start out at an incredible interest rate and then after a few months or years, the interest rate could dramatically rise.
Make sure you know of any fees that are associated with the loan. Some lenders will put in fees into the agreement that they never really explain to you. Most loans will come with a certain initiation fee, but this should not be an outrageous amount. Make sure to ask if there are any monthly or yearly fees associated with the loan as well. Also, be aware of what the late payment fees are as well. It definitely happens to a lot of people that they pay a payment late or forget to make a payment and you may be surprised at how much these fees are.
Lastly, know how long the loan is for and any penalties you may face for prepayment of the loan. Some people think that they are getting a great deal on a loan because their monthly payments are small but then they find out the loan is for an extensive period of time. Most loans range from 2-5 years, but you it’s not uncommon for lenders to give out unsecured loans for 10 years. You need to calculate the whole loan and not just look at the monthly payment amount. Also, if you plan on paying the loan off early, look into what the prepayment fee or penalty may be. Some fees may only be $50 while others may be as much as 10% of the total loan amount, which means on a $10,000 the prepayment penalty is $1000.
Cheap loans are definitely the way to go, but you need to make sure that you have read the whole loan agreement and the loan is actually a good deal for you. Finding a cheap unsecured loan may not be the easiest thing to do, but once you have found that cheap loan that and check all of these important factors, you are good to sign those papers and not have to worry about putting yourself under anymore financial stress.