- Personal Finance
There is an army of lenders out there dying for your custom, they will
do almost any thing to give you credit .
Some of these lenders may offer you loans based on the equity of your home,
and not according to your ability to repay the loan.
Finding the right lender and picking the loan that suits your circumstances can be a daunting affair.
Here is some loan advice that applies to personal loans, mortgage loans, bad credit loans and even a payday loan.
1. Get expert financial advice or trusted friendly advice
Before you choose a loan that is right, you might want to consider talking to any one of the following:o An attorney, o A financial advisor, o Somebody you trust, o Non-profit credit and housing counseling services. That way they can help you make a smart loan decisions or help you manage your debt.
2. Compare Lenders
Yes you have to shop around and compare several lenders, just as you shop around for physical goods.
These should include banks, savings & loans credit unions, and mortgage companies, etc.
Visit their websites and find out the following information:
o Annual percentage rate (APR) - APR is the most important pointer to use for comparing loans when you are shopping for a loan. It takes into account interest rate, points(one point equals one percent of the loan amount), mortgage broker fees, and certain other Credit charges the lender requires the borrower to pay, expressed as a yearly rate.
As a rule of thumb, the lower the APR, the lower the cost of your loan.
o Points and fees. Find out about points and other fees that you'll be charged. Points are usually paid in cash when you close the loan, you can also get financing for points. If you finance points, you'll have to pay additional interest, thereby increasing the total cost of your loan.
o Terms & Conditions of the loan. These include information like how long it will take you to repay the loan.
o Prepayment penalties - These are extra fees that may be due if you pay off the loan early (by refinancing or other means). Such penalty fees are crafted in just to force you to keep a high-rate loan by making it too expensive to get out of the loan. Find out If your loan includes a prepayment penalty, and know the penalty you would have to pay should you pay off your loan early.
o Monthly payments - This is the dollar amount you will have to pay every month, in order to service your loan. This is very important as it can to take up a considerable amount of your monthly household income. You can use a Loan Calculator to find out the exact amount. Check if this amount stays the same or changes during the life of the loan. Also verify if your monthly payment will include escrows for taxes and insurance
o Determine whether the interest rate for the loan will increase if you default. There is an increased interest rate provision which stipulates that if you miss a payment or pay late, you may have to pay a higher interest rate for the rest of the loan term.
o Check out whether the loan includes charge for any type of voluntary credit insurance, like
unemployment insurance,and if so, are the insurance premiums financed as part of the loan? Should this be the case, the consequence is that you'll have to pay additional interest and points, thereby increasing the total cost of your loan.
If you decide that you need credit insurance, check with other insurance providers to find out about their rates.
o Lastly look to see if the loan repayment include Balloon payments.
A balloon payment is a large, lump sum payment made either at specific intervals, or more commonly, at the end of a long-term loan. Balloon payments are most commonly found in mortgages, but may also be attached to auto loans and personal loans as well.
3. Questions to ask your potential lender
When you finally decide on a potential lender(s), contact them and politely seek clarification on the following:o If the loan has an insurance element ask how much lower would your monthly loan payment be without the credit insurance? o And also other details like: The insurance cover The length of your loan and The full loan amount. o Additionally ask about points and other fees that you'll be charged. o Further ask the lender if you can get a loan without a prepayment penalty, if there have such a clause and what that loan would cost.All these questions will help you determine if this is the right loan for you.
4. Try to Negotiate you loan terms
Nothing ventured nothing gained! It is always possible to negotiate.Always Try to negotiate unwanted provisions out of your loan agreement - like voluntary credit insurance.For people with a poor credit rating, seeking bad credit personal loans, this might not be an option as they have very little choice and many lenders might not want to lend to them anyway.
5. Your rights when you borrow money
Before you get into any loan, ask for a written Good Faith Estimate that lists all charges and fees you must pay at closing.Also ask for a Truth in Lending Disclosure, too. It states the monthly payment, the APR and other loan terms. Lenders might not always be required to provide these estimates, but they're very helpful because they make it easier to compare terms from different lenders.It feels good to know that the Truth in Lending Act gives most home equity borrowers at least three business days after closing to cancel the deal. This is known as your right of "rescission." In some situations (ask your attorney), you may have up to three years to cancel. To rescind, you must notify the creditor in writing. Ensure that your rescission is documented and that the letter is sent by certified mail, and you request a return receipt. This will enable you to document what the creditor received and when. It is always good practice to keep copies of your correspondence and any enclosures. After you rescind, the lender has 20 days to return the money or property you paid to anyone as part of the credit transaction and release any security interest in your home. Remember that you must then offer to return the creditor's money or property, which may mean getting a new loan from another lender.