8 Important questions borrowers must ask before settling on a lender - Baltimore Post-ExaminerBaltimore Post-Examiner

8 Important questions borrowers must ask before settling on a lender

Sometimes you may need cash quickly to handle things like medical bills, car repairs, and bills. When people find themselves in such a situation, it can be easy to overlook the implication of some loans in your future. However, if you are conscious of what you are borrowing as well as which lenders you work with can be entirely instrumental in keeping your debts to safe levels.

Before you settle on a lender, it is important that you take your time and ask a few questions that will determine if you are making a good choice.

What are the loan terms?

When selecting a lender, it is wise always to consider the terms because they can either make or break the loan deal. Interest rates are significant because they determine the cost of borrowing. Because this can influence the payments you will be making; it will also impact your cash flow. High-Interest rates imply that a loan is expensive and the monthly payments are bigger. When you are seeking to borrow, you want to get low-interest rates.

The repayment period is a crucial factor that determines if a loan is right for you or not. If you are struggling financially, you may want to find an option that allows you to repay the borrowed money in installments as opposed to making a lump sum payment. However, you need to understand that long repayment schedule means that you will pay more interest over the borrowing phase. On the other hand, a shorter repayment period can save you some money but it may strain you financially if you are struggling.

What are my credit scores?

Whether you want to take a personal or a business loan, your credit profile plays a major role in determining available options. If you don’t know your credit score, you should make it a priority to get a credit report and know where you stand.

Not all lenders treat credit scores the same and you can find a lender who doesn’t judge you based on your score but instead, they concentrate on your propensity to pay the borrowed money. Nevertheless, having a good credit score gives you an opportunity to get a low-cost loan while poor scores may lock you out of some borrowing options.

Knowing your credit score helps you understand which options are most appropriate. For instance, you would be better off working with a traditional lender when you have excellent credit scores. Usually, you can get lower interest rates and the repayment term tends to be friendly. On the other hand, people with low credit scores may find alternative online lenders who work with clients who are struggling with credit profiles. However, the catch is that you may be required to pay higher interests.

How fast do I need the money?

The urgency of the funds is critical when you want to borrow. Some expenses need quick actions and they leave you without the luxury of time. Most people are particular with the timing of their loans and waiting for a couple of weeks for an approval tends to put them off.

Some lenders have a faster turnaround time than others and this means that you need to choose carefully. At the same time, you may be charged some extra fee to get same day service, but you can also find a lender who won’t charge additional fees for quick funds.

How much money do I need?

While this seems like a simple question, most people have a difficulty deciding what to borrow. This may be attributed to the fact that people tend to believe that having access to a lot of money can help iron out their troubles.

When a lender notes that you are looking for the highest possible amount, they know that you don’t have a plan for spending the funds. Ideally, you shouldn’t borrow an amount just because you qualify. On the contrary, you should only take what you need at any given time. It is important to understand that loans cost you money and you must include the cost in the equation before submitting your application.

When you know the exact amount you need it becomes easy to settle on a lender. Usually, some credit providers offer higher amounts than others and you need to make sure you are working with one that can give you the money you need.

What is the payment schedule?

In the past, payments were made on a monthly basis but the rise of online lenders has brought daily and weekly payments. This schedule has gained popularity since it can smoothen your cash flow in a month. This is contrary to monthly payments which can leave a borrower in a cash flow quagmire because of the lump sum payment.

If you are working with a firm that expects you to make daily or weekly payments, it is prudent to make sure you can handle this schedule. Your cash flow should be in tune with your payment schedule to avoid any problems.

How do I repay the funds?

Some financial institutions prefer still comfortable with physical checks from borrowers, but a considerable percentage working with automatic debits. To the lenders, this method is convenient and they can get the payments without delays. At the same time, you can be sure late payments won’t damage your credit scores.

However, it is wise to ask your lender the exact amount that will be debited in any given payment. Try to find out if the deductions are fixed or the account balance determines it. When working with a creditor who deducts the money on a daily basis, you need to ascertain whether it will be any day or only on business days. In addition, inquire about how problems with debits are handled specially with regards to penalties.

Are there additional fees

Besides the interest rates, a loan may come with some extra fees. When there are several additional costs, the loan can become quite expensive. Before settling on a lender, make sure you ask if they have hidden charges.

More often than not, financial providers will disclose their fees but there are others that try to conceal them. If you read the loan agreement, you can quickly spot the additional charges for a loan. However, it is wise to ask for more information about the various costs and understand when they become applicable. When you are working with a good credit provider, they will be open about their charges and they will be happy to explain everything to you.

Final words

When you ask questions and shop around, you’ll quickly discover that you have several loan options. Some alternatives tend to be better than others depending on your needs and qualifications. As such, you should always settle for an opportunity that makes your life better and safeguards your financial future.

 


About the author

COMMENT POLICY

HOME / ABOUT / CONTACT / JOIN THE TEAM / TERMS OF SERVICE / PRIVACY POLICY / COMMENT POLICY