The first issue that consumers should be aware of is that the term personal loan can havedifferent meanings, depending on who you are talking to. For example, a personal loan maybe thought of as being the opposite of a commercial loan. A commercial loan, in thisexample, would be a loan to be used for business purposes and backed by the assets of thebusiness.
With many lenders, a personal loan is any loan other than a mortgage loan (home loan).Some lenders will use the term personal loan to denote any loan that is below a certaindollar amount. For example, a loan of $500 might be considered a personal loan. A cashadvance from your credit card might also be considered a personal loan. Personal loans ofall types can be either secured loans or unsecured loans, depending on the lender'spolicy.
When shopping for the best personal loan it is imperative that you read the lender'spolicy on loans and that you understand the terms and conditions of the loan. Manyconsumers are hooked into a loan by a low introductory interest rate only to find outlater that the rate will skyrocket over time. The only way to really know what theinterest rate of a loan is going to do is to read the contract carefully and ask questionsif you have any.
Most consumers already know that they need to find a low interest rate when shopping for apersonal loan, but there are some other issues that can be very important as well. Isthere a grace period with the loan and, if so, what is it? How are the interest and theprincipal paid on? There are some personal loans where the first set of payments is usedto pay off the interest only, and none of the payment is applied to the principal. Thereare other personal loans that divvy up the payment; some is paid on the interest and theremainder of the payment is paid on the principal.
If your circumstances are such that you have to apply for a secured personal loan, knowwhat assets are allowed to be used as security for the loan. All secured personal loancontracts should be examined very carefully. The reason for this extra care is that youcan lose your collateral if you can not or do not meet the terms of the contract duringthe course of the loan. You will also want to pay particular attention to the interestrate that will be charged on any secured personal loan.
One of the most effective ways to shop for a personal loan is to do so online. Manylenders have online sites where they post their offerings as well as the interest ratecharged for each offering. Many of them also have online representatives who can help youwith any questions that you may have concerning a personal loan.
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