Loans are of various types and it is not easy to determine
that which loan is the best for you when there are a number
of options open. There are a wide range of banks and financial
institutions that are offering loans these days. But it is very
confusing to decide as to which is the best option for you.
When you think of a loan there are a number of things that come with the package. These include the interest rate, the eligibility requirements, if collateral is required the requirements of the collateral, the repayment terms etc. Getting the best deal on a loan requires a lot of market research and some negotiation skills.
When you think of getting a loan for any purpose there should be a few things that should be taken into consideration before you start your search. Some of these points are mentioned below.
The interest rates- the interest is the extra amount that you pay on the loan amount. This is paid for the lenders services and the interest is calculated on the total amount of the loan that is borrowed. People usually jump for loan offers with a lower interest rate but forget to look at the repayment terms. There are times when the loan with a higher interest rate also offers a good deal with good repayment terms.
The repayment terms- after the interest rate the next major point is the
repayment term of the loan. These terms differ from one lender
to another just like the interest rates. The repayment terms
are the instructions that the lender gives to the borrower regarding
the payment of the loan. These would include options like automatic
withdrawal, or making payments using stubs, the time period
that would be allowed for the payment of the loan. Good repayment
terms even with a slightly higher interest rate would be the
best deal that a person can get.
The collateral requirements- some of the best loan deal offers come with the collateral requirements. There are some loans that do not require collateral. These are known as unsecured loans. But most of the good deals are the secured ones. These require a high value collateral which is required to guarantee the payment. When people offer a high value collateral lenders usually agree for flexible loan terms and a lower interest rate. Pledging a collateral that has a good market would be the best deal. Some of the best collaterals would include vehicles, real estate, home equity etc.
If you have a collateral of high value then it is easy to find a lender in the market. This can be a good option even for people who have a bad credit history. With a high value collateral you can get the loan amount that you desire with a lower interest rate.
When you want to get the best deal on your loan you should be ready to do some hard work. Shopping for lenders can help you get some of the best deals. When looking for lenders you should not go in for the first offer that you come across. You should approach more than a few lenders and get quotes from them. Talk to the lenders and let them know about your financial situation. After the lender is aware of you financial background he would offer you a loan with certain terms and interest rates. Get these quotes from more than a few lenders and compare these quotes.
While comparing the quotes you should always remember to compare the APR. The annual percentage rates give you the actual cost of the loan and they are inclusive of the interest rates as well as the fees involved in the loan. The lowest APR would at times be the best deal for you.
Besides looking for traditional lenders you can also look for online lenders. There are a number of lenders that work online. The cost of the loan from these online lenders is lower as the application and processing fees is reduced. The online loans are cheaper as compared to traditional loans. But when you take online loans you should make sure that you have confirmed about the lender and the company. Be sure that you are dealing with authentic lenders.
Having a good credit history is your passport to any type of loan. If you have a good credit score and history then half of your work is done. Be sure that before you apply for any loan you get a copy of your credit report and analyze it carefully. Check the credit report for any mistakes if there and report to the major credit bureaus. Having even a slight mistake on your credit report can cause trouble for you in getting the loan. Once you have analyzed your credit report you should approximately calculate the amount of interest that you would be charged. This would give you an idea about your monthly payments and you can narrow down your choice of lenders.
Getting a good deal for your loan requires smart shopping and if you have a good credit score then you should not hesitate in negotiating with the lender. The borrower should target more than one lender at the same time. Taking a loan can also help people who have a bad credit history to improve their credit status by making the payments on time. All the payments that the borrower makes are reported to the major credit bureaus and are noted. Finding the best deal on any loan is easy if you take out some time to do a market survey and compare the offers from various lenders.
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