What You Need to Remember About Loans
What You Need to Remember About Loans
Loans equate to debt. It is one form of debt. Debt being a negative side of a financial state is undesired. No one wants to have debts. If possible no one wishes to pursue a loan. No matter how much financial literacy program has been given to anyone, the possibility that one will experience a applying and paying for a loan is most likely to occur. Having loans is part of life and as most would often say, you will never be a real human being unless otherwise you have experienced applying and paying for a loans.
There are varied reasons why people avail of loans. The leading reason is the need for cash. One needs cash to finance an unexpected need. A family member was hospitalized and the insurance plan can no longer cover the succeeding expenses. There was a sudden need to repair structures inside the house. A student who intends to complete his college degree is forced to take student loans. Someone probably wants to acquire a new car. While his monthly salary can afford the amortizations, the immediate down payment serves as another problem. Someone is also eyeing the need to acquire his first real estate. Unfortunately, the existing cash cannot afford the fees. Hence, a loan appears as the best option.
People have different reasons for acquiring loans. It maybe for personal use, real estate and unfortunately, it arises because of a negative condition. Regardless of the loan’s purpose, there are considerations in selecting the best agency that will provide the loan. Below are some factors that people who have loan intentions might consider.
Interest – As always, the cost of borrowing the money is the first priority. There are different interest rates imposed, depending on the nature or purpose of the loan and the funding institution. More than the actual value of the interest rate, one has to consider whether the interest is absolute or expressed on a compounded level. If the interest is fixed for the entire amortization period, then it might be a good loan opportunity. Compounded interest unfortunately is the painful side of interest. Existing interest will further have another set of interest. Borrowers have to be careful. If the rates are too low, it might be a trap for compounded interest. High interest rates maybe painful. However, if it will be observed on a fixed period of time, then it might appear as a great deal in the end.
Terms of Payment – Borrowers usually look for prolonged payment period. Longer payment period is desired. This however comes with a tradeoff. The small amortizations breed more payment and yield high interest. On the contrary, shorter payment period may entail significant amount of money. But in the end of the borrower spent less for that loan.
Penalties – If a borrower misses a payment, how much will be the cost of missing that payment? Some financing companies are lenient. They impose grace period to borrowers. Be sure to verify this with your designated agent or financing institution.
Processing Period – Some companies can offer one day approval. Some will take weeks. The shorter processing is always preferred. However, one has to check as well. If the shorter payment period is means higher interest.
Payment Center – How to pay the amortizations? Convenience always wins the game. Some needs to settle payments to the branches of the financing institution. Others can provide straight debit to the credit card. Some can be paid with other banks. Ensure that the payment centers available will be convenient to the borrower. Online payments are also preferred. In cases when the borrower can make physical appearance, online payments can save the day.
People have different reasons of making loans. Whatever is the purpose of making a loan, always ensure that you remain as a dutiful borrower. Aside from gaining freedom from the debt payment, one benefit of responsibly paying loans is the increase in credit rating. Some may not realize that financial credibility is also established because of loans. The responsible loan payments made, the higher the credibility rating is gained. In the end, this can open other opportunities for the borrower. Who knows, the bank or funding institution may offer other financing opportunities and investments to you in the future.