Before you begin the whole process of taking out the loan, you have to recognize what kind of loan you need. Personal loans are unsecured and different lenders will offer them under various conditions.
By Guy Avtalyon
Before even starting to investigate opportunities, you have to know what to ask before taking out a loan. Your account will thank you later. The truth is that almost everyone will find a good reason to take out a loan, but keep in mind, that has to be a GOOD REASON. For example, vacations are a bad idea.
Suppose you already asked yourself all the important questions and you got the answers on them. Did you? Well, it isn’t quite the truth, right?
You’re in need and in a hurry to find a lender is a more realistic situation. Before you start examining what are your opportunities or start investigating online offers, for example, you have two main subjects that you should consider: why do you need a loan and what to ask a lender.
What to ask yourself before taking out a loan?
Why do you need a loan? It is a personal question. Will that borrowed money help you achieve your goals? Do you really need it?
Personal loans are tools that must help you to solve your financial problems but you must have a plan for that. As we said, taking out a loan for vacations is a bad idea, rather open target savings account for that purpose. It will take time until you save enough but paying back loans also require time.
But the reasonable decision is to take out a loan to pay out some debt with high interest. How much do you need exactly to borrow is crucial. Online applying for personal loans is very easy, but did you determine the exact amount of cash you need to borrow. If you add up all your debts you’ll find that exact amount.
How much can you afford to repay?
Personal loans will provide you cash for your needs, but it’s important to borrow what you can afford to repay. So, before you apply you have to examine your payment options. Calculate your monthly payment. For example, you know the amount of money you’ll need to borrow. But to calculate your monthly payment you’ll need to know the interest rate and loan length. Loan length is an important question and it is often your decision. You may choose to pay a larger payment per month, so you’ll need a shorter time period to repay your loan as a whole. If you choose a longer repayment timeline, you’ll have to pay smaller amounts every month.
Also, the interest rates will affect your repayments. Try to find a lender that offers lower interest rates, that will save you money because if the interest rate is higher, you’ll pay more money for the interest.
When you are searching for some online lender, always seek the lowest interest rate as possible.
Before taking out a loan ask what is your credit score
Your credit score may decide if you are qualified for a personal loan at all. Also, if you are qualified for getting a personal loan, a good credit score may provide you better terms. With a bad credit score, you’ll haven’t such good terms. Yet, it’s still possible to get a personal loan with a bad credit score.
Some online lenders will give you a chance to see your credit score without paying and without obligation to take out a loan.
It’s up to you to decide if an unsecured personal loan is suitable for you. Unsecured personal loans have fixed interest rates and fixed payments every month. Payments for other loans may differ from month to month and as the lifetime of your loan is approaching to the end.
Can you trust the lender?
When you’re in a real need and you need that money quickly, there is an army of lenders willing to deceive you and put you in a dangerous situation.
Trustworthy lenders will look at your credit score, credit report, and examine whether you are able to repay the loan based on the ratio of your debt to income.
If they can check you, you can check them also before taking out a loan. For the US-based residents, check complaints reported to the Consumer Financial Protection Bureau. Also, you have plenty of websites where you can find other borrowers’ stories. Thanks to the internet everything is much easier. The trickiest part is that you’ll need to give some sensitive personal information if you want to use an online lender.
Check them again and again
So you have to check them and be sure you are dealing with trustworthy lenders because some risks may occur. Fake lenders can be an extremely dangerous choice. They can promise a lot of beneficial things, but after you pay what is needed for approving the loan, you may not get what you wanted and what you paid nor what they promised. Also, if you choose a fake lender, it is possible to pay more interest or more fees. For example, some trustworthy lenders will never ask for advance fees. With legitimate lenders, the only fees you have to pay upfront are, for example, appraisals or credit checks. But you’ll have to do that only if you are taking out large loans.
To lenders who allow anybody to take a loan, you’ll pay high interest. They will always calculate the risk they have to take or simply, they want to steal your data or money.
Also, be very careful, actually, you have to avoid all lenders that offer you to send the amount requested by wire.
Why would they want you to send money by wire? You have a credit card or check to do that. If you find such a lender you can be sure it’s a scam.
Some of these “artists” added some words to their names that may suggest the U.S. government has approved the lender. Also, some will choose the name of some well-known financial institution but will make small, barely visible changes. That is a sign you are dealing with the false lender.
What to ask a lender before taking out a loan?
Ask the lender to explain all about different interest rates and to tell you how each of them could influence your financial situation and loan purpose. The other info you should ask your lender is how much you’ll need for down payments. In most cases, it will be 20% but can be changeable from lender to lender and depending on your credit score. For example, some will demand significantly less.
Also, you would like to know what all the costs are. This means you have to know even before taking out a loan the cost of lender’s fees, recording fees, taxes, etc.
You need to know if you can get a loan rate lock. That is important if interest rates are rising. Of course, they are changing on a daily basis but if that change is notable maybe you’ll choose to lock a loan rate, for that the lender will charge you and you’ll need to know how much the fee will be.
Also, are there some prepayment penalties? They are not allowed in every state in the US, but it is important to know if your lender can charge you penalties if you pay the loan earlier.
Not everyone is an expert in mortgages and mortgage terms. Ask anything you’re not certain about. There is no stupid questions. You have to know all details, ask the lender for each one before taking out a loan.
What to pay attention to before taking out a loan?
When you need money, you may not have enough time to think about your financial future. So, you have to be careful and wise. Take care of how and under which conditions you are taking out a loan. Ask as many questions as you can. Demand the answers because they can save you money. Before taking out a loan from a lender, ask yourself what is the real purpose of borrowing and can you keep your debt under control. For that, you’ll need to know all details about the conditions under which you are taking out a loan.
Borrow only the amount you really need and you are capable of repaying. Lenders will try to give you the maximum loan but do you need it? Can you afford it? Always think about the future and possible problems that can arise.