Not many of us have the luxury of being able to afford to pay for every purchase we make outright. This is why the use of private personal loans is so popular. It gives the individual the chance to make large purchases they otherwise would not be able to make and repay the cost of the purchase, plus interest to the lender of the loan. There are several different companies that offer personal loans like quick personal loans and high risk personal loans to individuals.

First of all there are the banks. You would think they would be your best bet however often their interest rates for these types of loans are traditionally higher than other lenders. Then there are finance companies. They are in direct competition with the banks for your business; they may not be able to offer you all the services of a bank so they lure you in with very competitive interest rates and terms. There are a number of other companies that provide personal loans that will vary from state to state – a quick online search or look through your phone book and you’ll find plenty of options.

Private personal loans tend to attract application fees. Sometimes there will be an annual or bi-annual account fee but this is not too common. Application fees are a one off cost charged at the drawdown of your loan. They are usually able to be incorporated into your loan so you don’t have to pay the fee up front. Because they are often piled in with the rest of the loan they are easily hidden, so make sure you ask what fees you are paying and what they are for if no one tells you.

Also ask about or read through the contract before signing to find out about any other fees. Late payment penalty fees are common with personal loans. This means if you are even one day late on making your repayment you could be charged a fee – often anywhere from $20-$100. Once you sign the contract you will be unable to dispute any late payments as you’ve agreed to the terms so read the contract carefully. As with some other types of loans you can provide security for a personal loan.

The lender will decide what security they will consider appropriate but will generally range from homes or cars to valuables or investments. Before you sign an item you own up as security make sure you fully understand what that means. Basically if you default on your payments, you are giving the lender permission to seize that item and sell it to pay off your debt to them. So offering your house as security for a personal loan could be a risky move.

Secured loans generally attract a much lower interest rate than unsecured loans as they are deemed to be less of a financial risk for the lender. Lastly don’t let the lender tempt you with other offers. Don’t go in there asking for $5,000 and come out with $10,000 because they offered it to you. While this might seem wonderful at the time, unless you need it you’ll only waste it away unnecessarily and find yourself paying for it for years to come. Private personal loans should be used very wisely as if they are misused they can be what holds you back from financial freedom in the future.