Monday January 18, 2021
Important things to know when taking a loan
Published : 14 Dec 2020, 12:21
Updated : 21 Dec 2020, 17:32
Whether it’s a personal loan, mortgage, car loan or combining loan, comparing the loans being offered by various banks can help you to save money. Applying for a loan is easy and there are many different banks and small loan companies with different products available. However, if you want to get the most out of the money, you’ll choose to compare the various offers and choose the best product for you.
Compare Interest Rate
All loan agencies are required to give an annual percentage rate of charge or APR for short. This value can be used to calculate the interest you will be required to pay on the loan. The number will be different based on the creditor you choose, the specific type of loan, the amount you are borrowing, and the loan conditions. Consider and compare various interest rates as they can vary from as low as 4% to as high as 21% in some circumstances. Requesting quotes from many different loan agencies will ensure that you get the best interest rate for you. Websites such as Sambla are great with helping persons compare different interest rates in order to find the best one.
Consider Additional Fees
In addition to the interest rate, you should also consider fees associated with the loan. Some of these fees are opening fees, processing fees, early closure fees and so on. These need to be considered as there are times when persons may have many loans and are seeking a combining and consolidation loan. However, when the fees are calculated, you may find that the combining loan is more costly to start and hence more expensive overall. This is not always the case, but it is something that should be considered. Some loans may have a low-interest rate, but with the associated fees, a loan with a slightly higher interest rate without the related costs may save you more.
The Duration of the Loan
Loans are associated with a payback period and this can vary from a few months to many years. Again, the duration will be dependent on the loan agency, the type of loan and the terms associated with the loan. The duration that is best suited for you will depend on your resources in paying back the loan. While a loan with a long term may offer low monthly payments, you may find that it works out to you paying more interest in the long run. A loan therefore, that has a higher interest rate but shorter duration, may end up costing you less and so the calculation of the overall interest payment is necessary.
Terms and Conditions of the Loan
Before signing off on any loan, you will need to read the terms and conditions associated with the loan. This is to prevent any unexpected expenses from coming your way. There are times when a loan may be advertised with a low-interest rate to make it attractive. However, written in the fine print is the fact that this interest rate will only be for the first few months. If you didn’t familiarize yourself with the terms and conditions, you would find yourself paying a whole lot more than you bargained for. Therefore, familiarize yourself with things such as early loan closure, late fees and loan repayment terms.
When comparing the annual interest rate, associated fees, duration of the loan and terms and conditions, use the information to calculate the total interest and fees each loan requires. Doing this will give you an overall view of the loan products available and help you see which loan will allow you to save the most money.