Buying a car, doing home renovations, or financing studies are some of the main reasons for requesting a personal loan. However, in order to acquire this financial product, it is important to meet a series of requirements, such as having an employment contract or demonstrating sufficient financial solvency. In addition, taking other aspects into account, such as the type of commissions or interest requested by the bank, can help ensure that this financial product does not turn out to be more expensive than expected. Here we give you some tips to keep in mind before applying for a personal loan.
Don’t ask for more money than you need
A few years ago, when requesting a loan, it was common for the bank to offer you an amount greater than what you requested. In this way, if the initial reason for requesting it was to change the kitchen in your house, you finally ended up also renovating the bathroom or buying new furniture. Today, this trend has changed a lot, both for banks and customers. The former no longer grant loans so lightly and the latter only request the money they need to cover a specific purpose.
When you ask for a loan, you will have to repay the money that you have been lent, along with the interest, commissions, etc., which will make the total amount to be owed considerably higher than the amount that was lent to you. Therefore, when requesting a loan, it is best to adjust the amount you want to request to the maximum and you will avoid paying more interest for it.
return it as soon as possible
When the entity with which you contract a loan asks you how long you want to repay it, try to make it as short as possible. You must take into account your income and make sure that you can periodically pay the fee. After that, make calculations and try to adjust the repayment term as much as you can, since the longer it takes to return it, the less security the bank will have and the higher the interest will be. In fact, this is one of the factors that makes the price of loans more expensive. On the contrary, if you pay installments of a greater amount, in a shorter period of time, you will repay the loan earlier and it will be cheaper for you.
Don’t be late on payments
When you take out a loan, it is very important that you pay the installments within the term that you have set with the entity, without delaying a single day. If you comply with the payment later than the contract contemplates, the entity may penalize you by applying late-payment interest, which is usually much higher than ordinary interest. If this situation is repeated or you stop paying a monthly payment, your debt will not disappear, but will increase and your assets or bank fees could be seized. For this reason, before requesting a loan, make sure that you can afford to pay it and, above all, make the payments on time.
Justify the expense
When you request a loan, most entities will ask you what you intend to invest said money in, since it is information that provides them with some security. It is not the same as wanting a loan to pay off previous debts, than to buy a car. For this reason, most entities offer specific loans to finance a specific purpose, for example buying a car, home renovations, studies, etc. These products have specific conditions and advantages. However, for the bank to grant you these benefits, you must prove with the corresponding documents that the purpose of the loan is the one you have indicated.
Do not resort to “quick money” and without guarantees
When you apply for a loan, entities usually take a few days to confirm that you are eligible to lend you money. To do this, they will ask you to provide guarantees that show that you can return it. If you are an employee, the most common thing is that they request your salary, which must be of sufficient income, and your employment contract, which may require that it be indefinite. If you are self-employed, you will also have to demonstrate economic solvency through invoices, bank statements or other types of documents.
However, there are some entities that offer “quick money” and without the need to provide payment guarantees. You must be careful with this type of loan, since they could charge you higher interest or commissions than other entities.
Look at the APR
When taking out a loan, you not only have to look at the interest that you are going to be charged, but there are also other conditions that can make your loan more expensive. Thus, when you request a credit or a loan, many entities may require you to contract certain products such as insurance or cards, or charge you certain commissions that can make the product much more expensive than it seemed if you only took interest into account. For this reason, when you are going to contract a loan, look at the APR (Annual Equivalent Rate), which is the one that includes the total cost of the loan, including commissions, interest, expenses and commissions.
Compare different personal loans
Undoubtedly, the best option to get the most suitable loan for each person is to compare the different products on the market and offered by different entities.
What are loan proceeds
If you’re a finance professional, you’re probably familiar with loan proceeds. This means the money you receive in the form of payment from your loan. A loan is what banks do for people who have poor credit. These loans are most commonly used for home ownership, and because of the low interest rates on these loans, many people buy homes for the purpose of renting it out. Are these salaries for your team also prompt? Are you making a profit on these salaries?
A loan consists of two elements: the amount of money that you borrow and the amount you pay back. The interest rate is also a factor in determining what you pay back. A 12-month loan from a bank will invariably be more expensive than a 10-year loan from a savings institution. This is because the rate of interest varies with the time value of money and the time period to maturity. All lending institutions will typically have a higher interest rate for loans that have shorter terms.