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If you are dreaming for a new car, looking to expand your business, taking care of a medical expense or planning for a holiday among other things, but do not have cash on hand to take care of the cost, a loan could be the financial solution you need to achieve your goals. Loans come in handy to help us suffice an economic storm. However, before applying, it is essential to consider a range of aspects, to ensure that we get the most from the credit and that we do not end up in a financial crisis.
Guarantor or no-guarantor loans?
It is easy to overlook this aspect when applying for a loan. However, you need to consider whether you want a loan with a guarantor or a loan without a guarantor. The former is when you have someone to co-sign the credit agreement – often; the person is willing to repay the debt if you default on the agreed repayments. The latter is when you apply for the loan without anyone to co-sign as the guarantor. Loans without guarantor are a great option, as they allow you the privacy, and also spare you from having to bother anyone.
Type of loan
From personal loans and business loans to equity loans and auto loans and everything in between, there seem to be endless loan options to choose from. Keep in mind that these loans present different terms and requirements. Do your homework first, before applying for any loan type.
The loan requirement
Different loans have different requirements – including age limit, income consistency, credit score, guarantors, security and so on. Before applying for one, you should make sure that you meet the set requirement first.
Interest rates
Irrespective of the loan type you settle for, you should be keen on the interest rate, as it will determine the total amount of money that you will pay. Since most lenders are willing to win you over, you may want to look around for the best deals available. But while you are on this, be careful not to concentrate on interest rates alone and forget about hidden rates, often disguised as appraisal fees, origination fees, processing fees, credit report fees, or administration fees. It’s true that the fee won’t raise the interest rate, but they will feature on your monthly payments. So, sometimes, it’s even wise to choose a loan with a slightly higher interest rate rather than paying upfront fees or large amount monthly.
Length of loan
It is also critical to consider the amount of time that you are expected to pay back the credit. Remember, time influences the total cost of the loan. And since different loans are designed in different ways and with varying lengths, it would be a good idea to discuss your options with the lender.
Pay off plans
You don’t want to take a loan without a clear plan on how you are going to pay it off. Think about whether you want to pay it off monthly, fortnightly or weekly; or if you plan on paying it sooner than the term. Knowing this will help guide you in picking the right loan for you.
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