Loans and mortgages can help you cover emergency expenses when you’re short on cash. However, there are several things you should consider before opting for them and interest rates top the list. The number of cases of debt collection harassment has gone up and if you are not careful, you could end up bearing several financial consequences.
Several consumers opt for high-interest loans without planning. Consequentially, they will have to deal with steep monthly EMIs and long loan periods. Here are some things you should know about before opting for high-interest debt.
The Loan Type
While all loan types (car, home, personal) come with seemingly high-interest rates, some loans are still more expensive than others. For instance, personal loans usually have higher interest rates than others. Additionally, since personal loans are unsecured, they are of greater risk to the lenders. This causes lenders to charge a high rate of interest.
Conversely, secured personal loans are offered against collateral. As a result, such loans have lower interest rates. However, they are not always easy to qualify for and you may have to wait for a specific period before you get loan approval.
Simple or Variable
There are various types of interest calculations that you should know about. The two most common types of interests are fixed and variable. Fixed interest rates are common and are calculated at the beginning of the loan. However, the interest rate for variable loans could fluctuate, though there is usually a base rate involved. If the market directive for the interest rate increases, then consumers are bound to pay more.
Know Your Credit Score
Your credit score significantly impacts your interest rates. A good score attracts a lower interest rate, while an average score often means you’ll have to pay more. So, it is crucial to know your credit score before you apply for a personal loan to analyze whether you are being charged fairly or not.
Prime Interest Rate
This is one thing that you should consider negotiating for. If you opt for a loan from a traditional bank, you may have one advantage for yourself. Traditional banks often offer interest rate discounts to regular customers. These low-interest rates are known as ‘prime rates’, and banks typically them reserved for their privileged customers.
Most people only opt for high-interest debt when the need for funds is urgent. So, these people often overlook the planning phase. This could eventually lead to defaults in repayments and harassment from the collection agents.
Briteside Solutions focuses on credit empowerment by educating consumers on their financial rights. So, before you decide to take up a loan or if you are constantly bothered by the bank representatives or collection agencies, get in touch with us right away.