Getting a loan is no small thing. Whether you’re looking to get home equity loans to renovate your property or short-term business loans for a quick cash injection, it’s important to choose the right loan service that can cater to your needs.
How do you know if a loan or a lender is right for you? Here are five things to consider when you’re trying to find the most suitable loan service.
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Loan type
Once you have determined why you need a loan and how much money you actually need, you should know what type of loan may suit your needs. Different types of loans may offer varying features and can be used for various purposes. Knowing the type of loan may also influence the type of lender you should approach.
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Interest rates
Interest rates will determine the total payback amount or how much you officially end up paying for a loan. The lower the interest rate is, the lower your repayment amount and the total cost of borrowing will be. Interest rates depend on various factors, including the kind of loan you’re getting, frequency of payment and length of the term.
To help you get competitive rates, consider comparing multiple options before choosing a lender or making any final decisions.
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Repayment terms
The most suitable loan service does not only fit your needs but also your income level, cash flow and personal circumstances.
If you opt for a short-term loan, you may be able to save money as you’ll pay the interest for a few years only. You will also be able to pay back the loan sooner. However, you’ll have a higher monthly repayment. Meanwhile, a longer-term loan means substantially lower repayments, but it will take you longer to become debt-free. The large amount you’ll pay in interest is also a drawback to a long-term loan.
When choosing a loan type, you must also be aware of how flexible the lenders are with the repayment terms. Will they let you put a payment back one month if you can’t pay this month, or will they put a huge fine for any late payments? How about when you suddenly have enough money to pay off your loan all at once? Will you be allowed to do it, or will they charge you with exit fees for finishing the deal early?
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Speed and convenience of application and funding
The length of an application process varies among lenders. Some lenders may ask you to fill out a lot of paperwork and require many supporting documents. Others may have minimal documentation requirements and ask you to fill out an online application form. Some lenders may settle the loan application within a considerable amount of time, while others may transfer the funding within a few days after your application.
Before you apply for a loan, you should consider how quickly you can apply and the time it takes to receive the funds from your potential lender. If you’re looking for short-term bridging loans or fast caveat loans to fund your urgent needs, then you probably would want to choose a lender who can quickly process your application and release the funds within a few days after your application.
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Your income
Your borrowing power can be influenced by your income. You can put yourself in a good position to get a loan and comfortably pay it off by considering your cash inflow.
The amount you’re earning can have a significant impact on the amount you can borrow. Your income also largely affects your repayment capacity. Some lenders may require you to provide evidence of a steady income or how much you’re earning. They would want to know that you will be able to pay back the loan. Others also consider any overtime you get paid, while others don’t.
When planning to get a loan, you will want to have the right loan service for your specific needs. We hope these five considerations can help you find the most beneficial financial product and lender.
