Loans come in all different shapes and sizes. Understanding what loan options are available and what lenders need from you will make it easier to get the money you need. There’s nothing like being armed with knowledge to save yourself some money, so it stands to reason that it pays to educate yourself before financing any major purchase. Here are three things you should know before you apply for a loan:
Type of Loan to Apply for
a) Personal loans
- Secured loans: Personal property is offered as collateral and may be granted to individuals with poor or no credit history.
- Unsecured loans: Based on credit scores; no collateral is necessary
b) Business Loans
- Term loans: General purpose loans that are paid back over a set period of time.
- Short-term loans: Smaller loans that are taken for periods of less than one year and paid back in one lump sum.
- Equipment financing: Loans granted for purchasing equipment; equipment is used as collateral
c) Student Loans – Student loans may be obtained through private lending institutions or through the government’s aid.
d) Mortgages – used either by purchasers of real property to raise funds to buy real estate; or alternatively by existing property
e) Equity Loans – used to describe additional borrowing, normally secured as a subsequent charge
f) Car/Auto Loans – a personal loan to purchase an automobile
Regardless of the type of loan you decide on, you need to pay attention to interest rates. These will play an important role in deciding the total amount of the loan that must be paid back. Since most banks and financial institutions are willing to compete for your business, it may be a good idea to seek for the best possible interest rate. Fees may not cause the interest rate to increase, but they will be included in your monthly payments. If this is the case, you might be better off choosing a loan with a slightly higher interest rate instead of paying a large amount in monthly or upfront fees.
Length of Loan
Depending upon the type of loan you need, the length of the loan will determine your total loan cost. Due different loans set up in different ways, it is best to discuss your options with a bank or financial advisor. If you do obtain a loan with the hopes of paying the amount in full prior to the due date, be sure to inquire about any prepayment penalties you may be charged.
Your Current Financial Situation
The most important factor in deciding whether to borrow money is you. Looking at monthly and yearly budgets will help you understand just how much you can afford to make in loan payments, thus helping you decide on a loan amount. If you do decide that you need to borrow money from Richard Butler Creagh, check your current credit score to ensure that you will be approved for the best possible loan.