If you feel it is burdensome to pay off your home equity loan, it may be time for you to use a personal loan to consolidate it. Many consumers like to get financing with the least amount of paperwork as possible, which is why online lending has grown so much over the past five years. For many consumers, you simply visit the lender site to fill in the form and they will send you a decision in 1 – 2 days.
Since a personal loan is often referred to as an unsecured loan, you don’t have to worry about losing your home to the bank if you can’t keep up the payment. With online personal loans, you can typically apply for a loan amount from $1,000 - $35,000. The lender may charge an origination fee that is automatically deducted from the loan amount. The origination fee ranges from 5% - 10% of the loan amount.
Prior to applying, you should get preapproved to see what interest rate you would receive. The initial interest rate published at the lender site is usually not accurate. Prior to applying, you should perform interest rates comparison between 3 – 4 lenders.
Normally, you will have 3 – 5 years to pay off a debt consolidation personal loan. As long as you have a good credit score, you will have no problem in qualifying for a personal loan with a low interest rate. In addition, they also look at your debt to income ratio when determining the interest rate. Low debt to income ratio means your total debt is lower than your income.
If you get approved, they will send you a check or direct deposit the loan amount into the bank account. Every month, you are supposed to make the regular payment. The amount that you pay will go in paying part of the principal amount and part of the APR interest.
If you intend to pay more than the installment amount, you must first inform the lender and make sure the extra amount will be used to reduce the amount you owe. With more of your principal amount being paid down, you will also pay lesser interest fees. There are many online lenders that waive the prepayment fee for borrowers want to settle the entire remaining amount at once before the end of the loan term.
It is recommended that you choose the shortest repayment period on a personal loan. The shorter the repayment period, the lower interest fee you will pay although you will also be paying a higher repayment amount every month. Many online lenders offer fixed rate loan as an option for people who don’t want any surprise and want to pay fixed amount every month.
What you need to do after you get approved is to remember to make prompt repayment every month. As you submit prompt repayment every month, your credit score will increase and your debt to income ration will drop.
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