(ThyBlackMan.com) There are several things you should know before taking out a loan. You can check out our helpful guide by clicking right here.
Are you strapped for cash? One of the best ways to get money is by taking out a loan. Last year, Americans took out loans at a rate 10% higher than the previous year.
If you’re thinking about going this route, then there are some things you need to know. Understanding the basics of borrowing money can save you time and money for the future.
- What Can You Afford?
The last thing a person wants to do is borrow an amount of money and not be able to afford the monthly payments. Just because you are qualified to take out $100,000 doesn’t mean you should.
Calculate your monthly expenses to know exactly how much you can repay without digging into your budget if you have to take a loan, caution on the side of a smaller amount.
A small loan ensures you can repay it in a timely manner, and you can always borrow more later.
- Know the Fees and Interest Rates
Lending institutions don’t loan money out of the goodness of their heart. Interest and fees are how they stay in business.
Make sure you know the total cost of the loan – this includes interest, hidden fees, and administrative costs. Here are some of the extra costs they don’t mention:
- Late penalties
- Early payment penalty
- Loan processing fee
If you know exactly how much the loan will cost you over its term, you can plan accordingly. Many institutions won’t let you pay early, and it will cost you a penalty.
Shop around for the best annual percentage rate (APR) and terms possible. One of the best choices is a Canadian option to fulfill your funding needs.
- Reasons for Taking Out a Loan
Before signing any dotted lines, think about your reasons for taking out a loan. Do you want to go back to school? Are you trying to purchase a new car?
Whatever the reasons for your loan, they should be worth taking on debt. A car to help you get to work is a worthy investment. Going to school to increase your earning potential is a great reason.
A loan to buy expensive clothes or take a vacation is not worth the effort.
- Credit Score
Your credit score is your financial report card. Your borrowing and payment history are captured into a three-digit number.
Taking out a loan could damage your credit score and prevent you from getting good interest rates in the future. A bad credit score can also prevent you from living in a good apartment or even getting a job.
If you have a good credit score, the number will be above 650. An excellent credit score will be above 700.
Get Your Funding
You can get your funding that fits your needs. But make sure you know these four things before taking out a loan.
A loan can provide you with a financial lifeline, or you can cause yourself stress in the future. Borrow responsibly, and you’ll be able to invest in your future.
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Staff Writer; Fred Moore