If you rush into getting a small personal loan, you may overlook vital details that can cause you to accumulate future financial issues. Most small personal loans are dangerous but, for some, they are the only solution to current financial problems. When it comes to getting a small personal loan, you need to make sure you understand the process. Here are 5 important things you need to know about small personal loans:
Small loans can be dangerous
Small loans can lead to bad financial habits, like getting trapped in a cycle of taking out loans to pay back loans. You’re likely to see high interest rates on small loans, making it difficult to break the cycle of debt.
Rates may not be your only cost
Don’t get sold on the fact that you can get a small loan at a good rate. Make sure you read all the paperwork to see exactly what fees you will need to pay. Calculate all the rates and fees together to see if it’s worth taking out a personal loan.
Not paying back your loan can lead to greater financial disaster
If you cannot keep up with your loan fees and rates, you may get hit with big penalties, fees and interest charges. This will cause your credit scores to fall, making you a bad candidate for future credit. The lender may also go ahead with legal action against you, which can also cause a lot of pressure on your finances.
There are bad lenders out there
Even though you may need money quickly, don’t accept loans from any lender. Make sure you look at online reviews and, if possible, ask a few close family members or friends for help when choosing a lender. Here are a few red flags you should look out for when it comes to lenders:
- Failure to assess your information before guaranteeing you a loan – this is a legal requirement.
- Upfront fees – are they within the prescribed limits?
- Names similar to well-known companies – make sure you are dealing with the company you intended to deal with.
- Continuously asking for and trying to access as much of your personal information as possible, especially over the phone.
- Putting pressure on you to take out a loan quickly without giving you time to access other options.
Try and avoid small personal loans at all costs
It is easy to rack up debt. If you want to break out of the vicious debt cycle once and for all, contact debt rescue for help!