Not everyone has the finance they need to survive. Sometimes, you need to ask a lender for help if you don’t want to suffer the consequences. So, you apply for a loan and wait for the results. If you’re lucky, you get accepted and all goes to plan. Or does it? Unfortunately, applicants don’t do their research before applying, and this leads to problems further down the line. If you’re in the process of securing a loan, these are the things you need to understand.
Secured Vs Unsecured
Please don’t apply for a loan if you don’t know what type of loan it is in the first place. Lots of people make this mistake, and they lose their house as a result. As the name suggests, a secured loan uses assets to ensure that the creditor receives payment. Your property is a typical example, but there are others like a business or a car. If it’s possible, you want an unsecured loan so that everything outside of the agreement is safe. Plus, the right kind of bankruptcy will wipe out the debt, meaning it won’t tear your life apart.
Incentives & Pitfalls
Every form of credit has incentives and pitfalls. Obviously, you want to take advantage of the incentives and avoid the pitfalls. The thing is that it’s hard to do without the right knowledge. The way the lenders get you is by advertising features which seem beneficial but which have underlying drawbacks at their core. A conventional loan, for example, might have a low-interest rate for the first year. After 12 months, the rate jumps to a higher than average amount. If you don’t pay the money back within a year, it will cost you more. Student loans, on the other hand, have advantages like forgiveness which come in handy. As long as you know to fill in a student loan forgiveness application, the total amount could half. Always looks for the pros and cons before applying.
You Might Not Get What’s Advertised
Banks like to promote attractive rates that are supposed to help the average person with money troubles. What these adverts don’t say is that the rates are usually ‘typical rates.’ What does mean? It means that they don’t have to give the price to everyone that applies. Only two-thirds of applicants will get what they see, and the rest will get denied or receive a lesser amount. You might be part of the 66%, but you might not so be realistic. Otherwise, you might pin your hopes on a loan that doesn’t exist.
The best loans go to the people with the best credit. Regardless of how that makes you feel, that is the reality. All you can do is to try and fix your current credit score so that lenders take you more seriously. The good news is that it’s possible. Consolidating all your debts into one manageable payment is a great way get back into the bank’s’ good books. Also, you can create a payment plan which decreases your mandatory contributions.
If you want an excellent rate, you have to start tidying up the books.