Personal loan terms describe the amount of time you have to pay back a loan. But this is just a strict definition. There are more details and nuances to personal loan terms that go beyond basic.
At Greater Texas Credit Union, it’s important to us that our members are well informed. We want to be sure that you have a complete understanding of personal loan terms so that you can make an educated decision when you are comparing personal loan offers.
Term Length and Interest
Many consumers don’t realize that the length of the personal loan term also impacts the amount you owe in interest. As a result, two people who are locked in at the same interest rate might pay different amounts in interest depending on their respective loan terms.
For example, let’s say you have taken a personal loan of $5,000 with a 6% interest rate. A loan term of 12 months will bring the loan cost to $5,160. If you want to lower your monthly payments over a 24-month term, the total cost is $5,318. The only difference is the length of time you have to repay it.
Loan term length can also impact your rate of interest in certain situations. Personal loans lock you in at a specific interest rate for the life of the loan. If you decide on a longer loan term, your interest rate might go up, say from 6% to 8%. Of course, a higher interest rate directly translates to more money paid in interest over the life of the loan.
For an easy way to check the impact of personal loan terms on interest rates, check out our free, user-friendly online loan payment calculator.
Secured vs. Unsecured Personal Loans
When deciding what type of personal loan is right for you, knowing the difference between secured and unsecured personal loans is essential.
Secured Personal Loans
A secured personal loan is protected by the use of collateral. Essentially, you offer a qualifying asset as a means to repay your loan if you fail to follow through with the agreed-upon payment schedule. If your loan goes into default, the lender then has full rights to take possession of your collateral as a means to recoup their losses from the loan.
The positive aspect of secured loans is that lenders typically charge lower interest rates and offer higher loan amounts. Additionally, they are more likely to approve them, even if you have a lower than average credit score.
Unsecured Personal Loans
By contrast, an unsecured personal loan does not use any form of collateral. This loan type will depend much more on your creditworthiness and is more challenging to get approved than secured loans. They also typically charge higher interest rates.
The advantages of unsecured personal loans are that you don’t risk losing any of your property in the event of nonpayment, and there are fewer restrictions on how you use the money.
Typical Loan Agreements
If you’ve decided you’re ready for a personal loan and understand personal loan terms, it’s time to contact a lender. The basic steps of applying for a personal loan include:
- Filling out an application
- Granting permission for a lender to run a credit check (lenders usually pull results from the three major credit bureaus)
- Waiting for your application to be reviewed
- Learning whether your application has been approved or disapproved
If you are applying at Greater Texas Credit Union, your loan application will be reviewed and you will be notified of approval or non approval. And, if you are not approved for the loan, don’t fret. We can help you make focused improvements before reapplying. Greater Texas Credit Union will work with you!
Personal Loan Terms That Work for You
Personal loans can be beneficial for many different purposes, including debt consolidation, home and auto repairs, medical expenses, moving, and more! However, this is a big financial decision to make, and we don’t want you to settle for less than you deserve.
At Greater Texas Credit Union, we offer numerous personal loan opportunities with rates and guarantees that only a credit union can provide. If you have questions about personal loans or are ready to apply, please click the link below so we can assist you!