If you’re reading this, you are probably looking to apply for a loan. You’re not alone! Most people need a loan at one time or another. Some are looking to buy a house or car; others just need extra money for home repairs or a vacation.
Whether you are trying to obtain a personal loan or an auto loan, there are certain questions you might have about loans and the general process. We are here to help make the process as easy for you as possible. Here is a list of 5 questions you might ask before applying for a loan:
What is the loan application process?
You are probably wondering what the process is like to apply for a loan. You may be curious as to how long it will take for you to be approved for the loan, what you need to do to get approved, and how long it will take for you to obtain the money you are borrowing.
The good news is the process is fairly simple, and the loan application can be done online! You can expect a typical loan application to ask you to provide the amount and purpose of the desired loan as well as your employment and financial information. Just remember you can always contact a loan officer if you have any questions about the application process.
What is my likelihood of approval?
You might be concerned about whether or not you will get the loan, but the key is to stay positive! Unfortunately, people worry too much about their credit scores. While credit scores might be looked at in a general sense, they should not deter you from applying for a loan.
There are many other factors that are taken into account that will increase your chances of being approved. Lenders want to help you get a loan, and many will give you guidance and counseling on ways to improve your likelihood.
Secured or unsecured?
Secured loans are protected by an asset or collateral. So if you default, the bank can seize whatever assets you pledged to guarantee your loan. Secured loans are the best way to obtain large amounts of money because the lender has more assurance that the loan will be repaid. They usually have lower interest rates and higher borrowing limits. Mortgage loans and auto loans are examples of secured loans.
Unsecured loans are the opposite. They have considerably higher interest rates because lenders are taking more of a risk since there are usually no assets to recover if you default. To obtain a secured loan, you are typically judged based on character, capacity, capital, collateral, and conditions. Lenders will look at your ability to repay the debt and other economic factors. Examples of unsecured loans include credit cards, most personal loans, and student loans.
What is my interest rate?
In other words, how much are you charged to borrow money? This is usually stated as your APR or annual percentage rate. It lets you know how much you will eventually have to pay back in total. The higher the interest rate, the more you will end up paying for the loan.
Ask the lender if the interest rate is fixed or variable. Variable rates can change monthly or annually. Find out how often the interest rate is adjusted, how it’s determined, and if there is a limit on how high the rate can go.
What is the repayment period, and can I pay the loan off quicker?
First, inquire about the amount of time you have to repay the loan. The shorter the repayment period, the higher the monthly payments. The longer the repayment period, the lower the monthly payments. However, you will have more interest to pay since it’s over a longer period of time. Therefore, the cost of the loan will be higher.
Once you know the repayment period, find out if there is a penalty for prepayment. Sometimes you may want to pay off the loan quicker than the repayment period. However, some lenders will charge you with a penalty, so just make sure to ask.
Obtaining a loan should be a very positive experience for you, which is why we want to make sure you have all of your questions answered before you apply. We are always here to assist you in the process and give you the information you need.
If you are interested in applying for a loan, click here to be taken to our loan application!