Loan interest rates have been rising in recent years, and it is now only borrowers with excellent credit scores who tend to get offered the best deals. Because of this, the rest of us need to ask ourselves some questions before jumping in and taking the first loan that we find. In this article, we’ll take a look at the questions every borrower should ask before choosing a loan, and expand upon why each question is important.
Secured or Unsecured?
Secured loans are often called homeowner loans because they are only available to people who own property. Unsecured loans, on the other hand, are often referred to as personal loans. The difference between the two is that secured loans require you to provide something to the lender that they can take if you are unable to repay what you owe; most commonly your house. While this sounds scary, secured loans often have lower interest rates, so are a better option for those who can definitely repay the money they borrow.
What if I Don’t Have a Good Credit Score?
Many borrowers with a bad credit score are finding themselves getting rejected for loans from traditional banks. If you don’t have time to improve your score and require money fast, don’t worry as there are options available to you. If you just require a small amount of money to tide you over until your next payday, payday loans from a site like LoanPig could be a good option. If you require a larger sum, you’ll want to research companies that provide bad credit loans.
What if I Can’t Repay the Loan?
It’s important to ensure you can repay the loan you take it prior to accepting it, otherwise you could end up facing serious consequences. The first time you are late with making a payment, you will be issued with a default warning, giving you notice that if it happens again you will be taken to court. Lenders also have the right to pass the debt on to a collection agency, and the lenders of secured loans have the right to repossess your house. Defaulting on a loan is very serious, so make sure you do your research beforehand.
Will Borrowing Help Me Achieve My Goal?
It’s important to consider the reasons why you want to take out a loan. For example, if your car has broken down and you don’t have the money to fix it straight away yet need it to get to work, you have a good reason for borrowing. If, however, you want to take out a loan to purchase Christmas presents or go on holiday, you may want to reconsider, as opening a savings account may be a better option. In addition, if you are currently in debt, borrowing to get out of it may actually help. Just make sure that you take out a loan that has a lower interest rate than the debts you are currently paying off now.
Taking out a loan is not something that should be done on a whim. Keep the above questions in mind before choosing one that is right for you.