A personal loan usually occurs between an individual and a bank, though people are increasingly seeking out person-to-person loans. Both parties agree to a set amount of money which the lender will give to the other party, as well as an interest and payment rate, which regulates how much and how often the money must then be repaid. Most people, of many different income ranges, take out secured loans for cars or homes.1
When shopping for a loan, the APR (annual percentage rate) is the most important means of comparison. It accounts for the interest rate, mortgage broker fees, points (percent of the loan amount), and any other charges you may be required to pay, expressed in the form of a yearly amount. A lower APR means a lower loan cost, and it is important to ask if the APR is fixed or if it will change.
Unfortunately, when it comes to obtaining a loan, not all lenders are equally honest, and many take advantage of the elderly or those with a low-income. It is always advisable to consult an attorney, financial advisor, or someone else you trust before agreeing to a loan. There are several indicators from potential lenders that he or she should be avoided:
He or she…
- Encourages you/requires you to fill in false information on the loan application (for example, he or she tells you to say the loan is for business purposes when it is not);
- Pressures you into requesting more money than you need;
- Pressures you into accepting monthly payments you think you will be unable to make;
- Does not show you the required loan disclosures or tells you not to read them;
- Misrepresents what form of credit you are getting;
- Explains a different set of terms when you apply for the loan than is on the final documents;
- Tells you to sign in blank forms which the lender says he or she will fill in for you later; or
- Says you cannot have copies of the documents you have signed.2
All of these points are valuable to keep in mind when seeking and accepting a personal loan. Never forget, even if you do not accept a loan from your bank, the financial advisors there are invaluable for resources and advice.
1 Bainbridge, Jane and Lisa Hammond. “Low rates, high interest.” Marketing. 16 Feb 2005. 34. eLibrary. <http://elibrary.bigchalk.com>.
2 United States Federal Trade Commission, Office of Consumer and Business Education. Need a loan?: think twice about using your home as collateral. Washington, DC: Federal Trade Commission, Bureau of Consumer Protection, Office of Consumer and Business Education, 2003.
Jessica attended high school at Ravenscroft School in Raleigh. She participated in swimming, cross country, and track and field. In track, she was Conference champion her junior and senior years in the 100 meter hurdles. In school, her favorite topics were History and English, and in the summer after her junior year, she studied abroad at Cambridge University in England, majoring in European History and English Literature. That summer, she also attended the Tar Heel Girls’ State educational program, and completed the course that enabled her to become a lifeguard.
Throughout high school, Jessica had worked as a swim instructor for the A. E. Finley YMCA in Raleigh, but during her senior year she began to also work as a lifeguard. At the beginning of the year, her article on the development of the Gothic architectural style in France was published in the Concord Review, a national history periodical. In the spring, she made her decision to attend the University of North Carolina at Chapel Hill the following year. Later in the spring, she worked as a research assistant to Professor Michael McElreath of Meredith College. She researched and offered recommendations on potential reading assignments and textbooks for a future course on American Intellectual History.
The summer before beginning college, Jessica worked again as a swim instructor and lifeguard for the YMCA. She began school at UNC Chapel Hill in the fall of 2008. In the spring of 2009, she began work on an article about the changing social and economic roles of women in Mali, a sub-Saharan African nation.The following summer, she completed work on her article while again lifeguarding for the YMCA.
She is now nineteen and a sophomore at UNC Chapel Hill, hoping to major in History with a concentration in non-Western civilizations and a possible minor in Women’s Studies. She enjoys reading, writing, playing the piano, researching, and drawing, and hopes one day to become a professor.