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4 Tips For Taking Out Your First Personal Loan

by Beatrice Lambert

If you are preparing to take out your first personal loan, then you might be pretty excited about being able to borrow money from a bank or lending institution. You might be wondering about how the process is going to go, though. These are a few tips that might help you out a lot when you are taking out your first personal loan.

1. Check Out the Interest Rate 

As a first-time borrower, then there is a chance that you will have to pay a higher interest rate. This is particularly true if you have not built up your credit score in other ways, such as with a credit card or car loan. Just because you have to pay a slightly higher interest rate than what someone might have to pay if they had good, well-established credit does not mean that your interest rate does not matter at all. This means that looking for a lower interest rate among the different lenders that offer personal loans is important. Luckily, there are many personal loan lenders out there who offer reasonable interest rates, even for first-time borrowers.

2. Look at How Long You'll Be Repaying the Loan

Of course, you probably do not want to be paying on a personal loan for too long. Be aware of how many payments you will have to pay and when your final payment will be made. This can help you avoid being in debt for a long time, and it can help you prepare for your financial future. Also, consider asking about whether or not there are any prepayment penalties; you will probably want to find a loan that you can pay off early -- if you want to and if you are financially able to -- so that you will not have to pay on your loan for quite as long.

3. Pay Attention to Your Monthly Payments

You will definitely want to pay attention to how much your monthly payments are going to be for your personal loan. After all, you don't want to take out a loan that you cannot realistically afford to pay back, and you don't want to end up with monthly payments that will put you in a tight spot with your budget each month.

4. Make Your Payments On Time

Make an effort to pay your personal loan payments on time every month. This will help you avoid expensive late fees and higher interest. It will also help you build up your credit score if the lender reports to the major credit bureaus.