Using a personal loan to take your dream vacation or pay for a fairy-tale wedding can be a joyous experience. However, reviewing personal loan terms might not be as joyous. But it is still important to understand how long you will have to pay off the loan, what, if anything, it will cost to pay it off early and other elements of how the personal loan works. It’s important to read the loan agreement.
The loan agreement is where you’ll find items like the loan term and interest rate ranges. The loan agreement could also contain loan repayment details – things like whether your bank account can be automatically drafted for payments – and also personal privacy information.
One critical item is the length of time you have to pay off the loan. Personal loan terms typically are two to five years in length. Ideally, your lender will give you a choice of several different term lengths. This is important, especially, if you are using funds to pay off credit cards.
A credit card is a revolving loan that doesn’t require you to pay it off in a set time period. A personal loan is a fixed-term loan, so the payments are set to pay it off in full at the end of the loan term. If your loan’s term is too short, the payment may be too large for you to afford it1. So pay close attention to the loan term.
The loan agreement will also provide information on fees. Some personal loans may have fees. Some types of fees include origination fees, closing costs and application fees. These upfront fees increase the total overall cost of the loan. A prepayment fee is another charge that can be assessed, if you pay the loan off early. There is no prepayment penalty on personal loans from Discover, and we offer personal loan terms of 36, 48, 60, 72, or 84 months.
Discover Personal Loans can send the loan proceeds to you or directly to your creditors as soon as the next business day after acceptance. And there’s a 30-day guarantee if you change your mind. Even after you’ve received the money, you can simply return the funds within 30 days at no cost.
So if you’re considering a personal loan to pay down debt, take your dream vacation or pay for a fairy-tale wedding, be sure to review and understand the loan agreement to make the financial decision that’s best for you.