A personal financial loan can be wise when a consumer has a credit score of at least 640 and wants an alternative to credit cards, states Daily Finance. People who have lower credit scores risk loans with higher interest rates than credit cards and generally should not get such loans.
Consumers should not get personal financial loans if the loans come with prepayment penalties, warns Nerd Wallet. Other situations in which to avoid personal loans are when fees are charged for optional assistance and other services. In many cases, those fees are made via withdrawals from a customer's bank account and are easier not to notice. Customers should never link their personal loans to their checking accounts for automatic payments. An overdraft might occur and rake up hefty fees. Consumers can be proactive by not allowing automatic payments and getting low-bank-balance notifications.
Banks and credit unions tend to offer the best terms for personal loans, reports Daily Finance. Comparison shopping for the best terms and loan ranges can also save a consumer money.
Scam artists are common in the personal loan business; Nerd Wallet advises consumers to visit the websites of the Federal Trade Commission and the Better Business Bureau to check on the legitimacy of a business.