Personal loans are very popular in these days. Before you apply for the one of the offers, you should get to know all the important things.
1. It's easier than it looks
When people think about taking out personal loans, they go through mental gymnastics that could tire out any living person. Getting a personal loan is a lot easier than it looks. All you have to have is a good credit standing and a good relationship with your bank and you'll most likely get that loan. If you're not up to applying through a bank, there are various loan apps these days that would only require you to declare your financial status in order to grant you a loan.
2. Interest rates are important
Did you know that according to the Bangko Sentral ng Pilipinas (Central Bank of the Philippines), 47% of Filipino borrowers consider the interest rate of a loan above all else? This isn't because of nothing, either. Interest rates could make or break a loan. Sure, you'll get your money, but are you going to end up paying it back double?
One of the reasons why experts advise people not to go with loan apps is because they have higher interest rates than your traditional banks and government agencies.
3. There are two types of interest rates
You heard that right! You need to be aware about these rates before taking out a personal loan. Interest rates could be a monthly add-on or an effective interest rate. The monthly add-on rate is interest charged each month on the loan amount. The effective interest rate, also known as the annual percentage rate, reflects the true interest you're paying on a loan. When taking out personal loans, you need to keep this particular interest rate in mind.
4. Figure out which loan you need
Personal loans are much easier to obtain and usually much smaller than business loans or housing loans, especially in the Philippines. Just because the amount you'll get from the latter two is higher, it doesn't necessarily mean that the loan is for you. Remember that the higher the loan amount, the higher the interest is most likely going to be.
Business loans are often taken for business capital, housing loans are for purchasing houses, and personal loans are taken for anything between medical bills and tuition fees.