10 questions to ask before you take out a personal loan

Personal loans can provide an affordable alternative to credit cards and help you finance life's big purchases while saving on interest. 

Increasingly, personal loans are growing in popularity, with roughly 20.2 million borrowers in the U.S. according to the online lending marketplace Lending Tree.

It's critical that you have a clear repayment plan, whether you're looking to take out a personal loan to consolidate debt, finance a home improvement, fund your next big trip or pay for a cross-country move.

Below, CNBC Select offers 10 questions you should ask yourself to make sure you're well-prepared for a new personal loan.

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The first step in choosing a personal loan is knowing how much you need. The smallest personal loan sizes begin at around $500, but most lenders offer a minimum of $1,000 to $2,000. If you need less than $500, it might be easier to save up extra cash in advance or borrow the money from a friend or family member if you're in a pinch. 

For borrowers looking for smaller loans, PenFed, a federal credit union, provides a wide range of personal loan options, and customers can borrow as little as $600 or as much as $50,000.

When you take out a personal loan, the cash is usually delivered directly to your checking account. But if you're using a loan for debt consolidation, a few lenders offer the option to send the funds directly to your other creditors and skip your bank account altogether. 

If you prefer a hands-on approach or are using the money for something other than paying off existing debt, have the funds wired to your checking account.

A Happy Money personal loan may be a good choice if you're looking for a personal loan to finance debt consolidation. Happy Money allows you to deposit the money you borrow into your linked bank account or directly to your creditors.

You'll have to begin paying the loan company back in monthly installments within 30 days. Most lenders provide repayment terms between six months and seven years. Both your interest rate and monthly payment will be impacted by the length of the loan you choose.

Your interest rate depends on a number of factors, including your credit score, loan amount and your term (length of time you'll be paying the loan back). Interest rates can be as low as 5.99% and as high as 29.99% or more. Typically, you'll get the lowest interest rate when you have a good or excellent credit score and you choose the shortest repayment term possible. 

According to the Fed's most recent data, the average APR for 24-month personal loans is 11.23%. This is often well below the average credit card APR, which is why many consumers use loans to refinance credit card debt.

Personal loan APR is most often fixed, which means it stays the same for the life of the loan.

When you apply for a personal loan, you have the opportunity to choose which repayment plan works best for your income level and cash flow. Lenders will sometimes provide an incentive for using autopay, lowering your APR by 0.25% or 0.50%.

Some people prefer to make their monthly payments as low as possible, so they choose to pay back their loan over several months or years. Others prefer to pay their loan off as quickly as possible, so they choose the highest monthly payment.

Choosing a low monthly payment and a long repayment term often comes with the highest interest rates. It might not seem like it because your monthly payments are so much smaller, but you actually end up paying more for the loan over its lifetime. 

As a general rule, borrowers should aim to spend no more than 35% to 43% on debt, including mortgages, car loans and personal loan payments. So if your monthly take-home pay is $4,000, for instance, you should ideally keep all total debt obligations at, or under $1,720 each month.

Mortgage lenders in particular are known for denying loans to people with debt-to-income ratios higher than 43%, but personal loan lenders tend to be a bit more forgiving — especially if you have a good credit score and proof of income. If you think you can temporarily handle higher payments in order to save a lot on interest, you may be able to stretch this ratio a bit to take on a higher monthly payment.

It's harder to be approved with a debt-to-income ratio above 40%, and stretching yourself too thin could lead to cash flow problems. You should only do this as a temporary measure and if you have some kind of safety net, such as a partner's income or an emergency fund.

Personal loan lenders may charge a sign-up, or origination, fee, but most don't charge any fees other than interest.

An origination fee is a one-time upfront charge that your lender subtracts from your loan to pay for administration and processing costs. It's usually between 1% and 5%, but sometimes it's charged as a flat-rate fee. For example, if you took out a loan for $10,000 and there was a 5% origination fee, you would only receive $9,500 and $500 would go back to your lender. It's best to avoid origination fees if possible.

See our top picks for personal loans:

Select's list of the best 5 personal loans

Before you start applying for personal loans, it's important to know your credit score to make sure you can qualify. Most personal loan lenders are looking for applicants to have a good credit score, particularly online banks. However, if you have an existing relationship with a bank, you may get approved for a favorable deal if you have a good history of paying bills on time and honoring the terms of your past loans and accounts. 

Sometimes, credit unions will offer lower interest rates on personal loans and work with borrowers who have fair or average credit scores. But you often need to become a member and sometimes you need to open a savings account before you can qualify for a loan.

For people who don't have a great credit history, Upstart accepts applicants who have insufficient credit history or don't have a credit score at all. You will likely pay higher fees and interest rates than if you had a good credit score, so be sure to clearly read the terms and conditions before you sign on for the loan.

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Some personal loan lenders, like LightStream, deliver funds electronically on the same day you are approved; Discover Personal Loans will deliver funds the next business day. Other lenders need up to 10 business days. If quick access to money is important for your situation, be sure to select lenders with fast delivery.

Personal loans are a form of installment credit, whereas credit cards are considered revolving credit. Having both types of credit in your profile will strengthen your credit mix.

Having a diverse credit mix is helpful  — but it's not everything. Some say that adding a new installment loan, like a car loan or a mortgage, can boost your score, but there's no sense in taking on debt (plus interest) unless you actually need it.

To maintain a good credit score, focus first on the top two most important factors: on-time payments and credit utilization.

While taking on an installment loan is not in itself going to boost your score a whole lot, using a personal loan to pay off revolving debt will cause the most noticeable increase in your credit score. Once your cards are paid off, keep your spending under 10% of your available credit and notice what a difference it makes.

Select now has a widget where you can put in your personal information and get matched with personal loan offers without damaging your credit score.

Personal loans are a great alternative to 0% APR credit cards, but like any financial product, they are most beneficial when you have a plan. When you've gone through the above questions, do a soft inquiry on the lender's website or on a third-party lending marketplace so that you can see your options without hurting your credit score. After you see what you prequalify for, only then should you follow through with a hard inquiry. 

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Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.

Transcom Digital launches Hitachi's Eclipse washing machine

Dhaka, June 12 -- Transcom Digital, the largest partner of Japanese electronics company - Arcelik, has launched a new series of Hitachi Washing Machines.

Officials of the company introduced two models of Eclipse washer at a function at Transcom Digital Showroom in the capital on Monday.

Transcom Digital head of business Ritesh Ranjan and head of category Saikat Azad were present as guests among other officials on the occasion.

To celebrate Eid-ul Azha, the company has announced special prices for its front loading washers. The eight-kilogram capacity machine is available at Tk 55,900, while the nine-kilogram machine is offered at Tk 61,900. In addition to the cash discount, customers have a chance to win up to Tk 50,000 in cash discounts, free gifts, or a Mega gift through a scratch card. Furthermore, customers can also take advantage of special credit card offers Up to 10% discount/cashback from selected banks including Bank Asia, Lanka Bangla, NRB Bank, Eastern Bank, and City Bank

Special features of the Eclipse washing machine and washer dryer line are capable of cleaning clothes in rapid 15 minutes.

The users of Eclipse washing machines will get a 120-month warranty for the inverter motor and 24 months for spares parts and free service.

Published by HT Digital Content Services with permission from United News of Bangladesh.

Hitachi Astemo admits to falsifying data on brake testing

A Hitachi Ltd. subsidiary that makes automotive parts has acknowledged it was involved in misconduct dating back 20 years.

The improper behavior included faking data in routine brake testing and shipping suspension parts that did not meet the required standards.

Hitachi Astemo Ltd. supplied the questionable products to 16 companies, including leading domestic automakers.

The company apologized for the malpractice at an online news conference on Dec. 22, but declined to provide further details, citing the confidentiality of the contracts.

Hitachi Astemo said it is now trying to determine how many cars used those parts.

Toyota Motor Corp., Nissan Motor Co., Honda Motor Co. and Subaru Corp. each received those products, an Asahi Shimbun investigation found.

Although the parts are believed to have been used in many vehicles, Hitachi Astemo said it does not believe they pose any safety or performance problems.

Toyota said an in-house inspection of the parts conducted based on data provided by Hitachi Astemo showed no problems with their performance or safety. Nissan, Honda and Subaru reported similar exams.

Hitachi Astemo said fake data was listed in the inspection reports for five kinds of brake products manufactured at its Yamanashi factory in Minami-Alps, Yamanashi Prefecture, without having conducted any of the testing it agreed upon with its client companies.

The products were supplied to nine client companies.

Between October 2003 and March 2021, fake data was listed in about 57,000 cases.

At its Fukushima factory in Kori, Fukushima Prefecture, testing outcomes of two varieties of suspension parts had been falsified to meet a range of figures under the required standards.

They were shipped to five client companies. This kind of falsification was discovered in 259 cases, apparently starting in 2000.

Apart from this, the same factory had supplied 4.8 million units of four kinds of suspension parts that did not comply with the standards to 14 client companies since April 2018.

In addition, the company shipped 5.3 million units after it had altered the test results.

Hitachi Astemo was established in January by merging four automotive part manufacturers under the Hitachi and Honda groups. Hitachi controls 66.6 percent of the company.

The two factories belonged to the Hitachi group before the merger.

The misconduct first surfaced thanks to a whistleblower in December 2020, when Hitachi Ltd.’s quality assurance department audited group companies.

Hitachi Astemo confirmed the malfeasance at the Yamanashi factory in January and admitted the wrongdoing for the first time on Dec. 22.

But Hitachi’s investigation was apparently insufficient. The malpractice at the Fukushima factory continued until October.

Brice Koch, president and CEO of Hitachi Astemo, said at the news conference the company had to wait until this month to announce the misconduct as it has been going through thousands of records to grasp the details and put in place measures to correct the situation.

Koch said data was falsified because workers did not realize the importance of the testing and the company had allocated an insufficient number of workers to conduct it properly.

The latest announcement follows a flurry of data-fabrication scandals at major Hitachi subsidiaries.

One involved then-Hitachi Chemical Co., whose large-scale falsification of data on the performance of industrial-use rechargeable batteries came to light in 2018.

That prompted Hitachi to launch thorough investigations into the quality of products and the inspection systems of its group companies.

Two years later, however, similar misconduct was revealed at Hitachi Metals Ltd.

(This article was written by Koichi Murakami and Kenji Izawa.)