Loans can be complicated at the best of times. First, there are the lengthy and confusing applications that need to be filled out, then there are things like interest rates, loan terms, and equity to consider. Before all that, though, first you need to find the right loan for you.
Yep, to make things even more complicated right from the outset, there are a number of different types of loans that are available to most people. So, which loan do you need?
How Much Do You Need To Borrow?
This is the first step in finding the right loan for you. If you only need to borrow $1,000, for example, there is no point applying for a loan of up to $50,000. Similarly, if you need to borrow up to $50,000, then a loan of $1,000 probably isn’t going to help all that much.
Most loans start as small as $500 although the majority of lenders will offer $1,000 as a minimum. The maximum amount you can borrow will depend on your unique circumstances.
What Will Your Loan Term Be?
All loans come with a repayment plan, so before you choose the loan you need, first check to see how long you will have before you need to start paying it back. In most cases, you will need to start repaying your loan within 30 days with terms lasting from six months to 7 years.
There is no point applying for a loan (if you can avoid it) where you know at the start that you will not be able to repay it within the timeframe you are first given, but if your circumstances change after being accepted for a loan, work with your lender to sort out a payment plan.
How Much Are the Interest Rates?
Whatever type of loan you end up taking out, you will need to make sure that you pay attention to the interest rates you are offered. These can vary depending on a few things, such as the loan amount, the length of the loan repayments, and your own credit rating.
The current economy will also influence the interest rates you are offered for your loan, and can vary from anywhere as low as 3.49% to 29.99%. You will usually be offered a lower (and therefore better) interest rate if you have a great credit rating and a short-term payment plan.
What Are the Monthly Repayments?
Certain loans, like some personal loans, for example, come with the option to choose the best repayment plan for you which allows you to factor in personal income and outgoings.
Others won’t, so it is important to check what the monthly repayment plan will be before applying for a loan, as this may determine whether or not it is actually suitable for you.
If you know that you will not be able to afford to pay back your loan each month, you might need to look at borrowing less or extending the term of your loan so that when it comes to paying it back, you are paying off a smaller amount each time so it will be within your budget.
When Will You Need To Receive the Funds?
Depending on the money lending institution that you are borrowing from, you might have to wait a few days after your application has been approved before you can receive your funds.
In some cases, you will receive the loan amount electronically almost immediately after your loan application has been processed and accepted or at the very least, on the same day.
Other lenders have been known to take up to 10 business days before wiring the money to you which will obviously be an issue if you are under any time pressure to receive the funds. So, this is something that could determine the suitability of a loan if you will need it fast.
How Will Getting a Loan Affect Your Credit Rating?
Having a good mix of credit will diversify your credit history and can actually improve your credit rating, provided you are making all of your repayments on time. The only way it can badly affect your credit rating is if you apply for several different loans in quick succession.