We know being a gamer is not cheap. Affording all the latest equipment, consoles and games can break the bank. Which is why some gamers consider taking out personal loans to finance the expenses that come with their pricey lifestyle.
A personal loan is a loan that individuals take out with a bank or private lender to buy a car, finance a trip, renovate a home or simply to afford the latest PlayStation 5. Unlike a mortgage, banks usually do not require collateral for a personal loan. This type of loan implies a higher risk for the lender and therefore the interest rate is slightly higher for a personal loan than for a mortgage, where the loaner uses his or her apartment or house as collateral.
There are plenty of lenders offering personal loans today, and these loans can in turn be used for anything. Like games, consoles or a new PC or even the set up of a game room in your house. Visit LoanScouter for a comprehensive overview of some of the top personal loan lenders on the market.
If you are considering taking out a personal loan to afford all the expenses that tag along your gaming activities, continue reading.
Be aware of the risks of personal loans
When you take out a loan, you enter into a credit agreement with a lender – a financial institution such as a bank or a credit company. This agreement supplies you with some rights, such as the lender assigning a claim to another party, but the agreement mainly contains obligations for you.
The main obligation is to repay the loan within a specific timeframe. This is the main risk that comes with any type of loan. If you are unable to pay back the loan on time, or at all, several problems can arise. Further, a personal loan may limit your financial freedom in the future. This is because the total cost of the loan exceeds the amount you actually receive, due to the interest and fees of the loan.
In addition to the purely financial aspects of lending, each loan you take out also affects your credit score. If you applied for several different loans, that have not all had positive results, your credit score will be negatively affected. If your creditworthiness deteriorates, this can have several negative consequences in the long term, depending on how bad things are.
Your credit score plays a partial role when you apply for a loan, but also in other situations, such as when you rent an apartment. Which is why you should avoid too many credit reports as much as possible, and thus also too many loan applications.
If you decide to apply for a personal loan, compare offers from different lenders
If you are aware of the risks of personal loans, but still feel like it is the best option for you, you should compare offers from different lenders. This is to find the loan with the best terms for you and your situation. When comparing lenders, there are two main things to keep in mind: the interest rate on the loan and the terms regarding repayment.
The interest rate on the loan is the amount that the lender wants as a profit for lending money to you. There are two different types of interest rates that are good to keep in mind when comparing loans: fixed or flat rate and reducing or variable rate.
Fixed or flat rate means that the interest rate is a fixed percentage throughout the repayment period of the loan.
The reducing or variable rate is determined by the current interest rate market and is adjusted as the market changes. With that said, a loan with a reducing or variable rate can change its interest rate over time.
The best alternative? Well, it depends on the situation and the loan. Make sure you find a loan with an interest rate that suits your needs.
There are several approaches to finding the best loan for you with the lowest interest rate and the best terms. One option is to do the hard work yourself and visit the various lenders’ websites or physical banks and find out what terms you get if you take out a personal loan with the different stakeholders. Or you could use an online comparison tool to weigh up the different loans available.