Apply and Get a Loan Easily – Most times, we find ourselves in situations where we need additional fund support to complete a particular task or to support ourselves. Though most people see loans as a negative approach to survival, others see it as the only alternative to help them improve and achieve their goals.
Whatever the case might be, the best approach to loans is using it for its purpose, and ensuring that you go for loans you can easily pay back without any difficulty. To avoid been stuck in a bad loan service or financial situation, it’s important you don’t ignore the initial steps towards getting a loan. These steps involve understanding all the important terms associated with the loan and also mapping out how you will successfully pay back in case things don’t go as planned.
However, if you are interested in getting a loan now or in future, we highly recommend you go through this article till the end, to understand some important terms about loans before you take any loan.
important terms you need to take into consideration before getting a loan
Here are some important terms that any loan applicant should/must take into consideration before going for any loan from any loan institution:
- Interest rate
- The loan term
- The Loan guarantor
- The loan type, whether its secured or unsecured (More details below)
- The loan use
- the early exit fee
Loan Interest rate
The first thing you should look for when taking a loan from any issuing institution, is the interest rate that comes with the loan. This is how the loan institution makes profit. The interest rate on most loans are based on your credit score and you monthly income. There are two types of interest rates on loans and they include fixed interest rate and variable interest rate.
The fixed interest rate: this interest rate is for those that are not interested in getting a monthly fluctuation in the monthly repayments funds. Working with this interest rate type, you will be getting a fixed monthly charge throughout the loan period of existence.
The variable interest rate: this interest type is quite different from the fixed interest type because it comes with a fluctuating monthly repayment funds. With this interest rate type, you will be getting a fluctuating payment every month. For example, if the interest rates go up, your payment will also increase.
The loan term
All loans comes with a term, which is the maximum period you are expected to pay back the loan in full. This can range from 6 months to years. The higher the loan term, the higher the interest rate but the lower the monthly payment cost. The lower the loan term, the lower the interest rate and the higher the monthly cost. The recommended and best practice is to go for loans with a short term you can afford to pay up when due.
The loan guarantor
A loan guarantor is more like a surety in a court. This person will be held responsible in an event where you are unable to pay back the loan at the due date. You can opting for a loan guarantor if you have a bad credit score or you want to lower the interest on the loan you are procuring. But its highly recommended you go for loans that you can pay easily at the due date.
The loan type, whether its secured or unsecured
This is a very common scenario. The loan you are procuring from an individual or loan institution can be either secured or unsecured. A secured loan is a loan that requires you to provide some sort of valuable collateral e.g your house documents or car documents depending on the loan worth. This is to serve a security for the loan in an event where you are unable to pay back the loan.
An unsecured loan is a loan without any collateral. Such loan comes with a higher interest rate and this doesn’t mean you cant be sued to court if you default this loan. In some cases, you might be required to provide a guarantor or cosignatory for this loan.
The loan use
Though this is not common, in some cases the lender might need you to provide more information what you intend using the loan for. This will determine your approval, interest rate etc. In an event where you do not use the loan for the desired purpose, if you get caught, you might be charged for fraud and forced to pay back the loan in full. There are also some loans that are designed for some specific purpose such as health loans etc.
The early exit fee
This is also an important factor you should consider asking your lender about. The early exit fee is the fee you pay when you decide to terminate the loan request before the due date. You understand that loans comes with a monthly interest rate, so terminating this loans before the due date will reduce the profit the lender will be getting from the loans. Such events might require the lender to include an additional fee to cover up such situations and you need to be aware of such fees.
Putting all this terms into consideration you should be able to make the right choices and ask important questions when taking any loan. If you enjoy this article, please do well to leave a comment behind. This will encourage us to write more interesting articles. Thank You.