Don't Shoot Yourself In The Foot

Online, May 11, 2011 (Newswire.com) - If you're considering getting a personal loan, you need to be sure you have all the available information in order to compare and weight your options. There's a lot more to loan terms than interest rates on what you borrow. You'll also need to consider the purpose of the loan in the context of the loan repayment terms.

First of all, be sure you understand the various types of personal loans. There are basically two categories: unsecured and secured. An unsecured loan does not require any collateral and often come with a higher interest rate. Secured loans are available at a lower interest rate, but you will have to put up collateral in trust until you pay back the principal and interest.

Keep in mind that the term of the loan has a direct bearing on the interest rate. Short-term loans have higher interest rates than long term ones.

Get familiar with the concept of annual percentage rate. This is the amount of interest your loan accumulates for every $100 borrowed. It's usually compounded monthly. Many lenders also build in loan fees, and all loans are subject to default penalties. Consider this when you compare personal loan terms.

Compare the loan terms by simply sitting down and doing the math. Factor in the fees with the interest rates, and calculate how much money you'll actually spend to repay the loan in its entirety. Keep in mind that you may find a lender that offers a loan with lower fees and higher interest rates may be a better long-term deal than higher fees and lower rates.

If you can't figure out which loan is the right one for you, enlist the help of a financial adviser. Don't try to go it alone unless you know what you're doing. You'll wind up shooting yourself in the foot