When you are short of money and your options are limited, you need not be ashamed of getting loans. In fact, big companies like Dell, Starbucks, and Domino’s started with a loan as well. Loans you get to improve yourself or your business are considered smart. However, if you are getting a loan to pay another debt, then you might need to reconsider your decision.
There are several types of loan that you can get: bank loan, car title loan in Los Angeles, personal loan, etc. But before you sign the papers and get one of them, you should think carefully and approach it with caution. Here are tips from smart loan applicants that you might want to apply for yourself.
Find Your Reason
You should never get a loan for the sake of getting the loan. Having a debt is not a laughing matter. If you can avoid it, then you should. Before you go to the bank or approach an agent, get a paper first and list down all your current options. Then, determine the advantages and disadvantages of each option. Do you think that getting a loan is the smartest choice? If it is, then you should go for it.
Evaluate Your Financial Goals
Is your reason for getting the loan aligned with your definition of financial goals? You don’t want to compromise your long-term plan for a short-term project. Make sure that your loan can contribute to the achievement of your goals.
Create A Payment Plan
So you have decided to get a loan. How are you going to pay for it? Decide your payment plan before you sign the papers. That way, you will know if you can handle paying for it. How long will take until you pay it? Consider your plans in the future. You might have to sacrifice some of the budget you allot for your personal pleasure.
Consider The Interest
To avoid getting cheated, learn what the standard interest rate for loans is. According to Bankrate, the average interest rate for a personal loan is 10.4%. If the interest is higher than this, you might want to reconsider as the cost you will pay in the end will not be worth it.
Watch Out For Scams
A loan is meant to answer your financial woes, not add more problems to the list. Since most people who resort to this option are desperate, they are easy targets for fraudsters and scammers. Financial experts always remind applicants to review the policy of the loan. While there are many zero interest loans available, it is usually an introductory offer. If it’s too good to be true, then it is most probably a scam. To be safe, apply on legitimate companies only.
Review Prepayment Penalties
It’s highly important that you read the contract or the loan agreement policy before you make your decision. There are some loans that will charge you prepayment penalties. These penalties regulate how much the borrower can pay and when he will pay them. Usually, lenders allow borrowers to annually pay 20% of the loan. If you don’t keep your end of the bargain, you will pay a sum of money.
When it comes to money, you can never be too safe. Be smart lender and take every precaution you can take.
Image from http://www.bankruptcynot.com/loans-credit/reasons-personal-loan-not-approved-bank