You’ve crunched the numbers and it’s clear – you need a loan. Or, you’re ready to make big changes in life, the kind that can only be carried out with major help from a lender. Loans can help you move forward or get back on your feet, but they’re never to be taken lightly. There’s a lot to learn about how to choose a lender.
Some loans, like mortgages, can take decades to pay off. Therefore, the research you do and the questions you answer – prior to making the commitment – have a huge impact on your financial future.
1. What kind of loan are you looking for?
Some lenders specialize in certain types of loans. That is to say, your hometown bank might be the best place to look for an auto loan, but if you need fast cash, you’re more likely to seek a small personal loan online. Your short list of prospective lenders should each have a focus on providing the type of loan you need.
2, Is your credit up to par?
If you have bad credit, your options are much more limited. You could still get a loan from a reputable lender, but it will come with more strings. Are you ready to sacrifice what you want in a loan (offering up collateral, high-interest rates) thanks to your credit score?
If not, take some time to bring your score up, and then revisit the idea of borrowing.
3. Do the terms suit your needs?
It bears repeating: read the fine print. Are you expecting to pay back your loan in monthly installments? Double check to make sure that’s what your lender provides. Some less-than-ideal lenders online expect you to repay the loan in full within a very short time period and will hit you with fines and fees if you don’t.
Don’t get taken in; ask direct questions and read everything.
4. Have you done a comparison?
When you line up the lenders you’re looking at, what works best for you? One might offer a lower interest rate, but their monthly minimum due is pretty high for you. Another has a higher interest rate, but you’re more confident you can afford those installments each and every time.
With any loan, the most important factor is that you make every single payment. If you doubt for a single moment that you can afford to pay off what looks like a very attractive offer from a great lender, take a step back.
5. Have you read the reviews?
The internet has changed the way we consume everything, all thanks to crowdsourced opinions. Check your lender’s online reputation and see what people who have borrowed from them are saying. Short on time? You can also visit Loan Review HQ and get facts on a variety of lenders.
Some lenders make it seem like a breeze, but taking out a loan is always a big deal. Once you agree to the terms and get your money, the only way out is through repayment in full. Shop around to choose a lender, get familiar with the terms, and be realistic about what you can handle. Building a better financial future never involves spending beyond your means.