It’s almost impossible to live without some kind of a loan nowadays. The standard of living has become such an important feature that people often buy various products through loans. In return, those products improve the quality of their lives. However, every loan has its advantages and, more importantly, disadvantages. Here’s how you can get a loan under fair conditions and pay it back as soon as possible.
Analyze the market
First and foremost, you need to know what kind of loan you want to take. What we’re talking about here are personal loans. Their main purpose is to enable the borrower to solve a financial issue or buy a certain product. When looking for the best offers on this market, there are two most important things to consider – the interest rates and the payment period. So, you’ll get the most useful information if you analyze loan offers from several banks and choose three of them that look the least expensive. After that, call those three banks, explain them what you need and ask them to send you a loan offer on your email address. Also, insist that they include the payment plan, as well as the interest rates in their offers. That way you’ll get a thorough insight in your possibilities.
Secured or unsecured loans?
Every financial institution uses different defense strategies to protect themselves in case a debtor stops paying back their loans. The basic mechanism the most of them use is securing their loans with your assets. This means that you can lose an asset if you don’t return the loan as agreed. However, those secured loans come with lower interest rates, which is why many people stick with them.
On the other hand, unsecured loans don’t include your assets as a payment guarantee, but they’re more expensive, especially if you decide to take a long-term loan. So, secured loans will keep you disciplined when it comes to paying your monthly installments on time and keeping your personal assets. As oppose to that, unsecured loans are chosen more often by people with good credit ratings.
There’s no such a thing as free lunch. In other words, any sort of irresponsible behavior from your past, finances-wise, will await for you when you need a loan. Be it unpaid installments on credit cards, debts on other accounts or late payments of previous loans, your lender will check every single detail about you. However, don’t think that your dark past will eliminate you as a loan applicant. On the contrary, the bank will probably grant you a loan, but they’ll impose higher interest rates on that loan.
As the financial experts from Clean Credit would put it, never ask for a loan until you’ve repaired your damaged credit history. Otherwise, your financial situation will become even more difficult.
Long or short payment period?
It all depends on your income, the type of your job and the purpose of the loan. For instance, if you want to use a personal loan for a particular purpose, it’s wiser to go for a specific loan. Let’s say you want to buy a new car. Instead of directing the money from your personal loan to that purchase, choose a special auto loan. Also, consider the leasing option for this matter, as well. In both cases interest rates will be lower. Moreover, the car is an asset itself, so you won’t have to include any other personal guarantees.
As opposed to that, personal loans should be short-term ventures that help you solve a temporary problem, like a new household appliance or a personal borrowing.
A personal loan should be taken only when you’re sure you can pay it back in a year or two. Also, it’s vital to stay a disciplined payer, so as to avoid additional interest rates and penalties. That way, you’ll use the loan in a smart way and achieve the goal you had in mind when you took it.
Dan Radak is a marketing professional with ten years of experience. He is a coauthor on several websites and regular contributor to BizzMark Blog. Currently, he is working with a number of companies in the field of digital marketing, closely collaborating with a couple of e-commerce companies.