Consumer loans are a kind of personal loan that is used to meet your financial obligations. Whether it is a large purchase or a consolidating a debt, consumer loans come handy. During one point of time or another there are chances you will take a consumer loan. These loans are available both in the bank and through lenders. These loans come in varied amounts and it depends on the borrower’s credit scores and income. Some of the things to consider while taking a consumer loan are listed below.
Types of consumer loans
Consumer loans are of different types, including, loans for specific purpose like auto loans, education loans and mortgages, and variety of purpose loans like personal loans , credit card loans and home equity loans. This type of loan can help to make a big purchase or clear off debts.
Loan repayment
Consumer loans can be repaid in different ways among these instalments are the most popular option. This allows the loan to be repaid within the designated time. The payments are done on a monthly basis and the amount is fixed. In the case of time loans the amount is repaid in full within a specific time span. These loans are used as an interim solution till other types of financing is sanctioned. Depending on the credit taken the payment structure varies.
Rate of interest
Not all consumer loans attract the same interest. Before taking a consumer loan, it is important to know the rate of interest. It varies depending on your credit scores and the type of loan. The average interest for personal loan is put at 10% to 28%, credit card loan is placed at 15.07% and those for mortgage are between 3% and 4%. Remember the better your credit scores the lower your rate of interest.
Comparison with other loans
Personal loans are the most preferred to credit card loans but it is impossible to say which is better unless the products are placed on a comparative scale. All available options have to be explored before taking a personal loan. This type of loan is often unsecured loans as there is no need for collateral to avail the loan. This makes it riskier for the lender. To get a better rate of interest you can always back it up with equity or home assets. Before taking a personal loan make a comparison online. There are websites that offer comparison from various lenders based on your credit score.
Borrowing fee
Did you know that there are fees associated while borrowing a personal loan? So apart from the rate of interest, repayment period you should also know what type of fee is charged on your loan. Origination fee and application fee are charged on personal loans. These could run in a few hundreds and is attached to most personal loans. Prepayment penalty is also imposed on those who pay loans faster. In such cases an additional fee is charged. Only an elaborate research can lead you to the right consumer loan.
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