The process of borrowing a loan is easier and convenient. There are a lot of loan brokers and lenders who are coming up with new and innovative ideas to make the unsecured lending platform accessible for everyone. Getting a loan is not challenging anymore, but finding the right loan that will suit your financial needs and requirements is difficult. You must know how to search for the right financial products or this may lead you to enter a debt trap or a debt cycle. If you are a homeowner and you are looking for a loan to manage your financial necessities, then you must ask yourself these 5 important questions before filling the loan application form.
1. Which type of loan should I consider to borrow?
When you start browsing the internet, you will be thrown a lot of options from lenders and brokers. The mantra is to not select the first option that you receive. In that way, you will never know what other offers that you are missing out on. Generally, there are two types of loan (i) Secured, and (ii) Unsecured. A secured loan is a financial product where you have to offer something of value such as your home as collateral while applying for a loan. Whereas with an unsecured loan, you can apply for a loan without providing any collateral or security. Choose the type of loan according to your loan borrowing affordability. You may be offered to borrow a large sum of money with a secured loan while with an unsecured loan, the amount that you are offered to borrow will be comparatively less.
2. Which type of interest rate should I look for?
There are two types of interest rate (i) floating interest rate, and (ii) fixed interest rate. With a floating interest rate, the rate may vary throughout the tenure of the loan. It may be high and it may be low. The actual rate of interest that you need to pay for the loan you are borrowing is unpredictable. You may end up paying more in interest while there is also a chance where you may pay less. However, the rate of interest is not guaranteed. With a fixed rate of interest, the rate is fixed throughout the length of the loan. You have to pay a fixed sum of money every month towards your debt. People often choose a fixed rate of interest as it helps them to budget.
3. Do I need a homeowner loan?
Before filling up the application form, ask yourself that why do you need to borrow a homeowner loan? What purpose is it going to serve and how will you be able to manage the financials after you borrow a loan? If you have any other alternatives, then you may consider them. Homeowner loans are generally secured. So, your house is the security that you will pledge to the lender while taking out this loan. If you seriously need this loan and you’re sure of the repayments, then go ahead or else, take a moment to rethink and find out other options.
4. What if I fail to make the repayments?
Your house can be repossessed by the lender and they may sell it off to recover their money. So, borrowing a personal loan needs a lot of strategic and financial planning. You need to have a regular and stable source of income or else you may end up in a debt cycle – which will also impact your credit history significantly. Draft a plan and prioritize your monthly expenditure. Check whether there is sufficient money left for the monthly repayments. Do not rush and take decisions as that will impact the future of your finance.
5. How do I find the best rate on a personal loan?
There are a plethora of lenders and credit brokers who offer homeowner loans. But how do you know that the rate of interest that you are offered is the best one in the market? For that, you need to compare the interest rates and Annual Percentage Rates (APRs) of different lenders. Comparing personal loans is an essential step before you’re set to enter into the final stage of borrowing money. A lot of personal loans comparison websites allow you to compare the rates in real-time and that too for absolutely free. Select 5-7 lenders and compare their offers to choose the best one available to you.
Whether it is a homeowner loan or a 12-month loan – you need to be ready for the responsibility that it demands. Gone are those days when it was way too difficult to get a loan, with the advancement in technology, applying for a personal loan is a minutes’ job. However, remember that different lenders have different lending criteria. One lender may not be willing to lend you money while another one may be happy to work with you. Therefore, it is necessary to know the available options before you apply for a loan.