Over the course of life, we face many situations in which we need a big sum of money abruptly, but are unable to get a loan due to a lack of collateral. I had been in this circumstance when I suddenly decided to get married, but luckily my good credit score saved me.
If you are in a similar situation and also have stellar credit, Low-interest personal loans might be the perfect thing for you.
So, how do these differ from normal personal loans?
Just like personal loans, low-interest personal loans do not require any proof which promises that you will pay back the loan i.e.: no collateral needed.
However, unlike personal loans that have very high-interest rates which are meant to compensate for the risk that lenders take when lending someone money without concrete evidence, these have a much lower APR.
Lenders take the risk of providing this facility as they require very strict credit underwriting.
So, if you can show that you have a really good credit score (something above 750 is amazing!), which basically signifies that you will pay the installments on or before due dates and will never fall behind, or, if you have a co-signer with top-notch credit, you’re eligible.
Things you should know about Low-interest personal loans:
When or for what reasons should you take one?
If you need urgent money for once-in-a-lifetime occasions, such as your wedding or renovating your dream house, you should definitely consider it.
Or, if it’s an opportunity that you should DEFINITELY avail, such as higher education offers or a business that requires an investment but is bound to blossom eventually, you are a good candidate for such type of loans.
If you want to pay off your credit card debt with this loan, that is a good decision too. It might actually reduce the overall amount you pay back.
However, do NOT take this loan to pay off other loans. You are just going to increase the amount you are needed to pay back (old loan’s principal+ interest+ new loan’s interest) and such decisions are never wise.
Also, do not take a loan for silly reasons. Indulging in expensive, unnecessary shopping is never a good decision, and taking a loan for it should not even be considered!
And lastly, if you are unsure about how you are going to pay back the loan, don’t take it. Loans are big responsibilities that should only be taken when you are certain about being able to pay your instalments on time. As hard as times might get, taking a loan to fix things and not being able to pay it back will only make things much worse.
· Instant cash that will meet your needs on a sudden basis. You do not have to worry about managing collateral to show to the bank.
· Lower interest rates than personal loans, which means lower monthly payments. As long as you make your payments on time, you are good to go.
· Consolidating your credit card debt in one loan lowers the total amount you have to pay back.
· Interest rates are still higher than loans that were taken by showing collateral. If you fail to make any payment, you might put yourself in a worse situation than you were in the first place.
· As you are not giving any collateral, the lender might become aggressive if you start delaying in payment. Since they are not holding anything as a guarantee, they might resort to placing liens on your personal property until you can pay them back.
Important things to keep in mind:
· When taking a loan, always make sure you are applying for the exact amount that you will need. Lenders might try to sweet-talk you into taking a bigger amount, hence increasing the chance of you failing payments, after which they will try to cease your personal property!
· Make sure you get to know the total amount repayable (TAR) before deciding. A low APR does not mean a low TAR.
Finally, make sure you judge your current circumstances before you decide to take the loan. Are your credit card payments cleared? How good is your credit score? Are you clear on the terms and conditions of the loan?
If you have positive answers to all these questions and more, feel free to grab that amazing opportunity!