(Newswire.net — October 10, 2019) — Loans are important if you want to complete a particular project or fulfill various needs that require immediate cash. In fact, most people rely on this form of financing to pay for their college tuition, car purchase and even home enhancements. Nevertheless, to avoid being taken advantage of by lenders, it’s important to know some few loan basics before borrowing money from any institution. Below are some of the points you should consider.
Loan Basics
A few loan basics to know include that you should ensure that the terms and conditions are favorable, check the interest rates, know how long the loan takes to get processed and to choose a trustworthy lender.
Ensure the Terms & Conditions are Favorable
Each lending institution has its own policies on loan provision, some may require you to make small monthly contributions to fulfill your payment obligations on your personal or business loan — even if you’re financing a pool into your mortgage, whereas others may be interested in a lump sum payment with interest done at quarterly or half intervals throughout the loan duration.
Likewise, when checking up the terms ensure that the collateral set against you is conducive and not opportunistic towards the finance provider. You should also look into if it is an unsecured loan or not. Sometimes, there are creditors who may want to profit unfairly from your situation, by introducing collateral clauses that take away your most prized possessions which are worth more than the money you borrowed from them.
Furthermore, the repayment period should be ideal, so that you can have sufficient time to recover the money without going bankrupt. While some people prefer longer payment plans, these usually come with higher interest rates compared to short-term loans which are generally more affordable.
Check Interest Rates
Rates refers to the extra amount of money you’ll pay the creditor on top of the cash that you borrowed from them. The percentage usually varies anywhere from 5% to 15% of the total sum borrowed, though financial institutions tend to have higher interests compared to registered private lenders.
Also, for most institutions the last month’s loan payment tends to vary from other typical monthly payments that you make. Therefore, ensure that you read the reimbursement clause on your loan contract carefully to avoid falling into the trap of missed payments which often comes with penalties.
Duration it Takes for the Loan Application to be Processed
Preferably, go for a lender with a reputation of processing cash requests within the shortest time possible. This will help you achieve your goals in a timely manner, since some emergency projects are only useful when fixed within the correct time frame.
For instance, if you have a leaking roof and require urgent money to do repairs before the rainy season begins, it won’t be of any use if your creditor takes several months to process your loan, by which time the rain would have already fallen and caused damage to your home.
Choose a Trustworthy and Responsible Lender
As one of the key loan basics, it’s recommended to do a background check on the creditor before approaching them for any money. Also ask for referrals from friends, family members or colleagues who’ve used these services before and therefore know who the best lenders are.
This way you’ll avoid falling into the hands of careless con lenders who may only give you half of the money you requested for, or keep postponing the date for receiving your cash without any good reason.
Bottom Line
Before taking any loan from a creditor it’s important to know loan basics such as, the interest rates provided, repayment period and their level of trust & professionalism.