Thinking of applying for a loan? Check out these 5 things you should know before hitting submits on your loan application.
If you’re thinking about applying for a loan, you should know that multiple credit inquiries can have a negative impact on your credit score.
While inquiries may only make a small dent in your credit score, if your credit score is low or you need a few more points to climb into a top credit score rating, it makes a big difference.
Continue reading this article to learn important things you should know about loans before you apply.
1. Not All Loans Are Created Equal
Before you sign your name on the dotted line, you should clearly read through all terms. You might not even need a personal loan if you just need quick cash to tide you over to the next week.
Learn about payday loans and see if they might be a better option for you. If you do need long term cash, that might be when you need to look into a personal loan.
2. The Interest Rate Might Be Higher Than You Think
Have you been watching the news, and you hear that interest rates are at an all-time high?
You get excited, and you’re ready to grab a low-interest loan, but you come to find out that the interest rate is nothing like what they said on television.
The rates you hear about on the news are often for 30-year loans with fixed interest rates. Discard what you heard on television and make sure to ask about how much the interest rate is and whether it is fixed or variable.
3. Personal Loans Aren’t Long Term Loans
When you take out a personal loan, these loans are usually not for the long term. When you look at a personal loan, you’ll most likely be paying it off in seven years or less.
Personal loans might be good for a car, but if you’re trying to pay for something major, this might not be the best option for you.
4. Length of the Loan
Before you apply for a loan, you need to know how long you have to pay it off. If your goal is to be debt-free in 3 years, but the loan term is 5 years, you need to know what to do to make sure you achieve your goal by paying more than the minimum payment.
5. Type of Interest
There are three common types of interest which are simple, compound, and precomputed. Knowing the difference between these types of interests will make it easier for you to know how much you’re going to pay in total throughout the lifetime of your loan.
You’re a Pro at Applying for a Loan
Now that you know these important tips, you can go about applying for a loan when you’re ready, and you find the right loan for you.
Do you need more help with financial matters? Our site is full of articles that can help you as you’re improving your financial future.
Browse our site, find your favorite section, drop a bookmark, and come back again soon.
My dad would like to apply for a loan this year since this will be needed in buying a house. Well, thank you for explaining here the importance of opting for a low interest rate. It’s a good thing that you clarified here that there are five long-term loans that she can avail of.