5 Smart Considerations Before Applying For A Loan
27 Sep 2016 in Finance
Are looking for a loan? A loan is a tricky business. An easy to pay loan today could turn into a bad debt tomorrow with no prior warning. The reasons for this are many. They include delayed salaries that will easily hike loan fees, getting laid off from your job, and having numerous emergencies that could force you to default. If you must take a loan, here are some smart tips that you should consider.
Know the Type of Loan that You Need
There are a number of loans to go for. First we have personal loans, business loans, student loans, mortgages, equity, and auto loans. Personal loans that come with collaterals are called secured loans. Unsecured loans depend on personal credentials and credit scores. Business loans can be term loans, short term loans, equipment financing loans, and lines of credit. Equity loans are in most cases for home improvement. Auto loans are for buying autos or cars.
Understand the Type of Interest Rates
Regardless of the type of loan you take always take a keen interest to the current interest rates. Why? Interest rates play a key role in determining the total amount of loan that you will pay back. And because financial institutions are always competing for business, shopping around would be a great option. Be wary of hidden fees that might be included in the rates with some banks such as origination fees, appraisal fees, underwriting fees, credit repot fees, etc.
Find Out The Down Payment Amounts
This simply means the amount of money that you put down. Mostly it depends on the financial institution that’s giving you the loan. Well not all loans will require down payments but loans that use fixed assets such as houses as collateral might require down payments. Down payments will help to lower the monthly installments. Remember, certain loans such as payday loans however don’t require down payments. Have a payday loan settlement plan instead.
Length/ Period of Your Financial Loan
The length of time that you have been given to repay your loan will also play a huge role. Shorter periods might mean huge monthly payments. Longer periods might mean smaller installments but very huge total loan payment. Either way going for a favorable period is the best option. Talk to a financial expert or even your bank loaning officer to help you decide the most credible option. Ask them if there is any extra fee involved such as prepayment penalty.
Know Your Current Financial Situation
This is the most important. Do the math and check your monthly bills, expenditures, and budget. Is there anything you can save? Are you comfortable with a loan? How much can you pay in monthly installments? This helps to prevent defaulting and will help you to have a smooth loan.
Anybody who wants a loan should first of all have the right knowledge about the loan that they anticipate. They should talk to a financial expert to advice them accordingly and also to give them the best payment options. Loans especially quick fix loans such as payday loans need a strategic payday loan settlement plan before you choose it.