The personal loan is probably the most common type of loan. What could be the reason for this and how much does a personal loan really cost the borrower?

Usually, when an individual needed money but does not want to spell out the purpose of this money, he takes a personal loan. In previous years, the steps taken to take a personal loan involve going to the bank and filling up an application form. But today, there are other agencies or groups that provide such personal loans. One can have a personal from the local supermarket. One can obtain personal loans from financing companies that seem to sprout like mushrooms during a rainy day.

This implies that there is a huge competition among lending companies. Such competition is beneficial for the borrower because the interest rates are being decreased in order to attract loan applicants. This also means that the borrower now has a lot of choices before him. The best thing to do is to shop around for the right lending company.

Hidden Loan Charges

A person must be extra cautious when he finds a lending company that offers ridiculously low interest rates. While finding the lowest interest rates is a major goal of shopping around for lenders, the one with the lowest interest rate may not be a wise idea. In some cases, lenders who charged low interest rates had included loan charges that are not stated up front when the borrower is applying for the personal loan. This means that the lenders who attached these hidden charges make profits out of such hidden loan charges.

On the side of the borrower, the best thing that he can do is to carefully read the small print. In fact, the borrower should read and weigh all that has been written on the loan agreement before signing up and finalizing the loan deal.

Actual APR

The actual APR or Annual Percentage Rate of a personal loan is computed using a system which is known as