Obtaining personal loans can be an excellent idea for fulfilling your dreams. For example, you can obtain the loan for your dream trip, or to own a car or a house. But, you should also be financially responsible for repaying the loans.
Penalty For Prepayment: There are prepayment charges charged by many lenders or the banks. Though most of the lenders do not charge this particular amount, you should avoid the parties who do. Make sure that you have asked about the prepayment penalties before taking the loans.
Insurance: Some of the personal loans may come with the insurance, but these offers can be dangerous. In most of the cases, either unemployment insurance or life insurance is offered by the lenders, along with the personal loans.
- Unemployment Insurance: Though a bit complicated, this type of insurance is sometimes included, with the loans. If you lose your job during the repayment period, this insurance can save you. But, you really need to calculate properly. If you are not at a risk of losing your job, within the next 12 months, you can easily save the value of this add-on policy.
- Life Insurance: You may have heard the common sales pitch from the agent that, with just the same price of the soda can every day, you can obtain the insurance of your life. But you should be aware of the sales tactics of the highly targeted jobs. You can easily save, if you go for the personal online loans where you can do a proper research before applying.
Pre-Calculated Interest: The pre-calculation of the interest can be considered as one of the traps while getting the personal loan. It is a bit complicated way of calculating the interest. The main aim of this scheme is that you pay most of the interest, within the earlier months of your repayment period. But, as you are paying early, you may end up paying a higher interest rate than the original.
Origination Fee: Most of the personal loans come with the origination fee that cannot be avoided at all. But, make sure that you are doing the comparison while keeping the annual percentage rate in mind and not simply the interest rate. Sometimes, people may get stuck at the origination fees, if they do not understand that the amount of fee is deducted from the amount of the loan. In case of the pre-payment, you also do not get the refund at times. So, the origination fee can be considered as the prepayment penalty, in disguise, of course. Make sure that you properly understand the fees and can compare the APR.
These are the traps that you require to avoid during the personal online loans. If you can properly calculate the annual percentage rate and check out the origination fee and avoid the add-on values of the insurance policies, you are surely in a better position. You should only go for the insurance policies, if you feel they are extremely necessary for you in that stage while obtaining the personal loan.
Author Bio: Derek Steve is a professional financial expert. He suggests various loans and advice on various financial products. In this article he is providing the warning signs or the traps that should be avoided during the personal online loans.