5 Things to Keep in Mind before Taking out a Loan
Taking out a loan provides the means for a large purchase or business start-up. Many fail to read the fine print. This leaves some consumers feeling like they have been misled when, in fact, it was their error for not reading all of the conditions of the loan. With several types of loans available, the terms are going to vary. It is important that you take the time to read every word of a loan agreement.
Loans do have fees other than interest associated with them. Some loans come with administrative fees, which are more typical with fast cash type loans. Fees are common for setting up automatic payment schedules. Fees are also common just for the loan itself, which are upfront costs.
Additional fees are attached to loans for bounced payments. These fees are on top of interest and any other miscellaneous fees associated with a specific lender.
If you are taking a short term loan, an APR is generally not provided. Always ask your lender what the APR is for the specific loan you are taking. It is ideal to figure in the APR to the loan amount to get an estimate of what your payments will be like. This helps you understand how much you will need to pay each month and how long it will take for the loan to be paid in full.
Do not take the first loan offer you are given. Explore your options and which financial institution has the best repayment plan for your specific needs. The interest rates should also play a big role in your decision.
It is also important to remember not to apply for loans with too many institutions because every inquiry into your credit history does cause the number to go down slightly. Do your research first and then apply with maybe 2 or 3 loan agencies that have the best structures for your needs.
Credit Bureau Reporting
If a loan company does not report to credit bureaus, consider a different company. Loans are based on credit, except for auto-title loans and payday loans, so the company should be reporting your payments to credit bureaus. Timely payments are reflected on your credit report in a positive way.
If you are a small business, it is even more important to ensure that your loan agency reports to credit bureaus.
While you may think it’s great to pay off a loan early, the lender may not be in agreement. Some lenders do charge penalties for paying off loans early. In some cases, you will still have to pay back the entire interest amount that would have been due had you taken the entire loan term to pay it off.
When taking a loan, do your homework. It is important to be aware of all of the fees associated with your loan, as well as your interest rate and number of payments required to pay the loan in full. If you find that you are going to be late with a payment, contact the loan agency as arrangements may be able to be made where penalties may be waived.