When you apply for a personal loan, it is important to find the best payment plan if you do not want to fail to repay or fall into deeper debt.
What Is A Personal Loan?
Taking a personal loan means borrowing an amount of money (usually from $1,000 up to $50,000) issued by banks, credit unions or private lenders to repay in monthly repayments within 1 to 7 years. You will also be charged an interest rate which ranges from 6% to 36% due to your credit score, credit record and debt-to-income ratio. The interest rate mainly depends on how risky you are. So, to receive a lower interest rate you may consider improving your credit score and cleaning up your creit report before applying for an unsecured personal loan. Also, secured personal loans allow you to get a lower interest rate by pledging an asset as security or finding a co-signer.
How To Calculate Personal Loan Payments?
You should choose the right amount of loan you need to cover your expenses if you do not want to face problems when paying off. To make sure that the loan is affordable, you need to calculate your monthly payments, the purchase price, additional fees and the total amount you have to repay over the life of the loan if the loan is affordable, before borrowing money. Using an online calculator can be extremely easy and helpful to do what-if calculations and make comparisons. You can find various loan payment calculation formulas and calculators on websites of most online lenders.
What Is The Best Deal?
The most accurate payment plan for the personal loan you have applied for depends on several factors including the loan amount you have borrowed, the interest rate you will be charged and the length of your loan. You may be given several options to consider by the lenders but these options can be deceptive sometimes. For example, you may be offered to stretch out the loan to make your repayments within 7 years instead of within 5 years.
Although that may sound better at first, you should be aware of the fact that stretching out the loan leads you to pay more interest over the life of the personal loan you have applied for. As an option, if there is not an early payment fee, you may consider repaying your loan earlier or paying more than your monthly payment each month to save on interest. You need to think further, shop around and negotiate to have the most accurate personal loan payment plan.