9 Questions to Ask Before Getting a Loan
People need a loan for different reasons, but generally, it is for development purposes. However, it is of great importance to ask yourself and the bank some essential questions to see which type of loans will suit your situation.
1. What is the condition of your credit report?
This helps in accessing the ability to get a loan. If your ability to get credit is low, it is advisable to raise it before applying for a loan. You can raise it by paying down debt you might be having. You can do it by making payment on time and removing incorrect information from your credit report history as well.
2. Is the loan to be applied secured?
Most banks need collateral before lending money to their customers. You may be asked to put up personal property as collateral. In case you default the loans payment, the bank can seize that property. Generally, most mortgages and car loans are secured as opposed to personal loans. You need to ask for clarification to be sure.
3. What is the nature of the application process?
Consider the duration it takes before approval of the loan you are applying for. Also, consider the eligibility criteria used. The bank may need a credit report, bank statements, and tax returns. Others may just give you a loan simply by stating your income. Hence, it is necessary to compare different lenders. Also, check the duration the bank will take before lending you the money.
4. How much is the application fee?
Different lenders charge different amount. Therefore, compare and choose the one that best suits you.
5. What are their interest rates?
Annual percentage rates acknowledged as APR differ among lenders. It is therefore your core duty to identify which lenders have the best package to offer you. APR determines how much you will be charged and the total amount you will pay. Interest rates on mortgages and student loans are usually low averaging 5%. Credit cards have interest rates of over 10 percent, while personal loans have interest rates that lie between the two.
6. How long is the loan repayment period?
Shorter duration of repayment leads to higher monthly payments. Loans repaid over a longer period reflects higher loan cost.
7. Is there a penalty for repayment?
Some lenders charge a penalty when you pay faster than the stated repayment period. It is hence advisable to find out from lenders first before getting a loan from them.
8. Is the loan use limited?
Some lenders restrict the use of borrowed money, especially student loans. They may restrict its use, so it caters for food, fees, and accommodation only. This denies you the freedom to use it anywhere else. Personal loans lack these kinds of limitations hence can be used as it pleases you. If you are concerned about your freedom to use the loan, ask for clarification first before signing up for a loan.
9. What happens if I default?
You should find out the penalties charged on late payments or non- payments. You should be in a position to bear the penalties if not, look for other alternatives.
Loans can help you pay off your debt as well as reaching your different goals like starting a business. It is important to look for the loans realistically.
For any other inquiries you may have, feel free to pay us a visit, or you may drop us a message to clarify any questions. As the Best Licensed Money Lender Singapore, we are in a good position to answer any further questions you may have.