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3 Tips For Choosing The Right Loan
Taking out a loan and willingly going into debt can be one of the most intimidating financial choices you make. However, going into debt isn’t necessarily a bad choice. Showing that you can take out and repay a loan over time is a great way to build your credit, while taking out a larger loan can help consolidate your debt all under one place. Before you sign on the dotted line, check out these tips.
Choose the Right Type of Loan
Image via Flickr by GotCredit
As you start your research, you’ll have to choose between a secured and unsecured loan. A secured loan is signed with collateral, like your car or house, that the lender can seize if you fail to make your payments. Most personal loans are unsecured, meaning they’re made based off your credit and financial history alone. The lender has to take a larger gamble when offering the loan, knowing they won’t be able to collect anything if you default.
While unsecured loans tend to put borrowers at ease, knowing they won’t be kicked out of their house if they can’t make a payment or two, secured loans are the better option. Secured loans from Avant tend to have lower interest rates because they’re less risky for the lender, which can save the borrower hundreds of dollars.
Talk to Different Companies and Banks
If you’ve worked with your local bank for years and have a responsible history with them, then they might offer you a good deal on a loan. Alternatively, you can look into Lending Tree loans or similar options, but don’t settle for the first quote you get.
Check out loan comparison sites or financial lenders in your area. Now that you’re armed with your bank’s “best deal,” you’ll know if you’re getting a better or worse offer than the original. You might find that other lenders think you have more potential and make a better deal than your bank.
Get the Right Loan Size and Interest Rate
This might seem like an easy question, but determining how much money you need can actually help you get a better interest rate so you don’t land further in debt. Let’s say you’re planning a wedding that costs about $20,000 and you want to take out a loan to cover it. If your wedding actually costs $15,000, then you could have had a lower interest rate and saved money. If the wedding is actually $25,000 and you need to take out another loan, you could hurt your credit from too much unpaid debt.
You want to create a cushion to go over what you originally planned, but don’t want to go so far over that you’re viewed as a higher risk. Thorough research of your needs and expenses is the best way to get a good loan deal.
Whether you’re collecting a $200 loan to buy get you through the holidays or a $50,000 loan for school or a house, research is the key to making sure you get a good deal. Talk to several institutions and know your options, and you should come out on top.
