Okay, so you need money. Why else are you looking for a loan? Loans can be daunting topics. It gets scary to think about borrowing such large sums of money. However, we’ve got lots of tips to help you through the process and keep your finances in line. If done correctly, receiving a loan from a finance institution can be a very valuable resource. Take a look at these personal loan tips that everyone should know before going into it.
1) Get the best deal on your loan
When you buy a car, you want to make sure you’re getting the best deal. Loans are no different. Do your research to make sure you’re applying for the right loan. Each loan has different strings attached to it, so make sure to talk to your banker and research it online so you are totally informed.
2) Pick the right lender for loans
You can get loans from many different finance institutions including banks, lenders and credit unions. Each has different rates and terms that you need to meet, so make sure the lender fits your lending needs. A key factor here is interest rates. You want to find a lender with the lowest interest rate, so you pay back less money.
3) Credit card caution
Credit card debt is a scary thing. If you can, you should always pay your credit card bill back in full. Otherwise get ready to pay some pretty high interest rates. If you take a personal loan out to pay off credit card debt, it’s important you do just that. Make sure not to dig the whole even deeper and ruin your new line of credit.
4. Fine print
Well a loan may seem great at face value, make sure to dig into it. Many people skip reading the fine print and miss crucial info on their loans. Know everything from your monthly payments, fees for late payments, prepayment fees, any penalties and more.
5. Credit score
Remember that score you learned about in highschool but never paid attention to. Well, that’s a credit score and it’s actually really important. Your credit score actually dictates the type of interest rates you’ll be paying. Your credit score essentially tells the lender how you manage your finances. Are you financially responsible or have you had some hiccups. They are looking to protect their loans, and if you have risky financial habits, expect to pay more.
6. Origination fees
Find an interest rate that’s super low? You might have a great find, but it’s also possible that it’s too good to be true. Check for origination fees. Origination fees are intro fees that are tagged on in the beginning that allow the lender to give you a better interest rate.
7. Affordable loans
Know your finance situation before taking out a loan. What’s your cash flow like and do you expect it to change? Gauge your financial situation and determine an amount that you can comfortably take out and pay off over time. The last thing you want to do is put yourself in a debt trap.
8. Automatic withdrawals
Many lenders would like complete access to your bank account. They’d rather take their monthly payments directly from you each period. Many lenders even have incentives for giving them access to your bank account so they can take their monthly payments. Make sure you’re aware of how withdrawals will be handled before finalizing the loan. It should be something you’re comfortable with.
9. Repayments difficulties
While the goal is to always repay a loan without any hiccups, sometimes unexpected circumstances prevent us from doing so. Check out what your options are in case of the worst case scenario. What are your options to modify the loan if you can’t make your payments?
10. Fixed and variable rates
One of the most common questions we hear is should I go with a fixed rate on my loan or a variable rate on my loan. Variable rates usually start with a lower rate, but also have more risk. If interest rates rise, your rate will do the same making your monthly payments even higher. Many feel more comfortable with a fixed rate, as it keeps your interest rate steady throughout the duration of the loan.