Things to Watch Out For When Taking Out a Holiday Loan
Sometimes there is not avoiding it. Taking out a loan to cover your holiday gifts, special trip and other related expenses might be the only avenue available to you if there are big ticket items you plan to purchase. So what are some of your loan options? You can choose to sign for a secured or unsecured, personal loan with a set interest rate. Other options include using the cash advance option for a credit card, or if it’s possible, borrow the amount from a trusted family member or friend. Whatever loan options you choose, you should know there are always pitfalls and other nuances to be aware of before you sign on that dotted line.
Secured personal loans are just that…secured with a personal item, of which you have a clear title. This may be a car, an instrument (or set of instruments), art, or even real estate. Secured loans offer the least amount of risk to loan providers. If you don’t pay, they collect. Simple as that. If you have stellar credit, then you can possibly take on an unsecured personal loan. These are relatively easy to obtain if your credit is acceptable, you have a job and carry no outrageous debt.
What you really have to watch is the interest rate. If at all possible, it would be smart to sign for a loan which has a fixed rate. Interest rates are set, and so are any fees you may incur. Alternatively, there is the loan with a floating annual percentage rate (APR). Its rates are tied into the current market and may fluctuate up or down (along with your loan payments) over the term of your loan. Avoid loans without a fixed interest rate. Otherwise, you will never be sure exactly how much the loan is actually costing you.
Cash advance loans from a credit card can be risky, but a viable choice if your loan amount is lesson than £5,000. Although it is relatively simple to get a cash advance loan, there are several things of which you should be aware. Convenience fees associated with cash advances against credit cards range between £10 and £20; that’s already on top of the interest payment you’ll have to make. Sometimes those interest rates can jump upwards of 40%. Keeping all this in mind, if you repay the realistic loans within six months, this could be a solution if your credit isn’t perfect and you don’t really have anything to procure a secured loan.
Borrowing money from trusted family or friends is an option that should be utilized as a last resort. If you receive a family loan, try to follow the same loan practices adhered to by banks. Sign an IOU and have a mutual repayment period written into the agreement, along with a negotiated payment rate. You may find family member may not want to do this and just say, “Pay me when you can.” Don’t fall into this practice. If you can’t make a payment, or don’t pay at all, it could do irreparable damage to relations.
Whatever loan option you choose for your holiday needs, keep this in mind…borrow only if you have the means to pay it back without undue hardship.
This article is provided by Agents of Drive Blog.