Factors To Consider Prior To Getting A Loan

Factors to​ Consider Prior to​ Getting a​ Loan
One cannot afford to​ go in​ for a​ loan just like that .​
There are a​ lot of​ factors to​ consider before putting yourself in​ an​ irreversible situation .​
You have to​ remember that once you​ put your signature on​ that contract,​ or​ at​ least after the​ usual 3 day grace period,​ there is​ no turning back .​
There are bound to​ be serious consequences if​ you​ find that you​ cannot repay your loan .​
In general,​ the​ loan market is​ divided into secured and unsecured loans .​
a​ secured loan is​ usually taken out against collateral .​
The process of​ acquiring this kind of​ loan is​ much quicker especially for those who have bad credit history and low credit rating .​
Since there is​ already a​ tangible asset that can be defaulted to​ if​ the​ loan remains unpaid,​ finance institutions give much lower interest rates for secured loans .​
However,​ in​ case of​ your inability to​ pay,​ the​ lender will take over your property .​
An unsecured loan on​ the​ other hand is​ usually given to​ people who have good credit history as​ well as​ high credit scores .​
As a​ result,​ it​ makes sense to​ go in​ for a​ secured loan.
However,​ just deciding whether to​ choose a​ secured or​ an​ unsecured loan is​ not enough; other factors must also be considered.
Interest Rate: Even if​ this is​ one of​ the​ most important details governing our decisions,​ you​ should not be blinded by faulty advertising .​
You could be enticed by low rates of​ interest,​ but this may not lead to​ savings for the​ duration of​ the​ loan may be longer .​
If the​ interest rate is​ reasonable compared to​ the​ loan term,​ then go ahead and sign those papers.
Loan Term: a​ lot of​ loans have fixed terms,​ usually 15,​ 20,​ 25 or​ at​ most 30 years .​
Some lenders will enable you​ to​ change the​ term,​ if​ they think you​ can pay the​ whole debt off within half the​ time .​
But be prepared to​ pay fees and penalties for early repayment in​ such a​ case .​
Ask your bank if​ they offer opportunities to​ pay them back earlier or​ later,​ and how the​ change will affect your interest rate as​ well as​ monthly payments .​
Hidden Charges: Look through all the​ clauses before you​ sign the​ contract .​
There might be charges you​ are not aware of,​ especially for home equity mortgages .​
Make a​ list of​ all the​ extra fees and penalties that you​ might be required to​ pay .​
Floating or​ Fixed Rates: If you​ availed of​ a​ fixed rate loan,​ then you​ know exactly how much you​ will be paying every month .​
Chances are your parents had a​ fixed rate loan on​ their first mortgage,​ because it​ was the​ only one available to​ them during their time .​
As time went on,​ things like the​ adjustable rate mortgage emerged on​ the​ scene .​
This is​ also called an​ adjustable or​ flexible loan in​ some cases,​ as​ the​ interest rates vary annually or​ quarterly,​ depending on​ the​ terms of​ the​ loan .​
If you​ are lucky,​ the​ low interest rates in​ the​ market could help you​ to​ save a​ lot in​ terms of​ interest.

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