You can receive a lump sum and pay it off in installments over whatever term you and the lender agree to. Although a loan can be useful, it could cost you more money than you’re prepared to spend and harm your credit score if you’re not careful. Here are three things to consider before you apply.
How good is your credit score?
There’s no excuse for not knowing your credit score. By law, you can request one credit report free of charge every year from the three credit reporting bureaus. Your credit score will be one of the most significant factors in whether the lender approves you for a loan and what type of annual percentage rate (APR) you get.
If you don’t have a good credit score, it’s in your best interest to improve it before applying for a loan. Getting a lower interest rate will save you quite a bit of money.
What can you afford per month?
Applying for a loan that doesn’t fit your budget will only lead to financial issues later. Failure to make a loan payment means you’ll have defaulted on your loan. At that point, the lender can repossess any collateral you put up to secure the loan or send it to collections. Your credit will take a huge hit during the process.
Look at your budget and decide how much of a monthly payment you can make before getting your loan. If you need a low monthly payment, you can get a loan with a longer-term, although this will usually result in paying more interest.
Where will you get the loan?
There are all kinds of lenders out there, and many of them are willing to loan you money regardless of your financial background. But not every lender is a good lender. Choose wrong and you could end up with a high APR and a loan that will get you trapped in a cycle of debt. Whether it’s a bank for a car loan or a mortgage company like Blue Wave Funding for a home loan, be sure to take your time to find a good financial institution to issue your loan. Read reviews and check out what kind of terms they offer to ensure that the loan will fit your needs.
Getting a loan can be a wise choice if you use it correctly. If you use it to invest in something that gains in value, such as a business, or to improve your quality of life, then the loan was well worth it. Just make sure you do your due diligence first to avoid borrower’s remorse later.
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- Wendy Holden
- Harper
- Kindle Edition
- Anton Treuer
- Publisher: Borealis Books
- Edition no. 1 (05/01/2012)
Last update on 2020-03-19 / Affiliate links / Images from Amazon Product Advertising API
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