Did you know that three-quarters of all Canadians have some sort of debt?
Times are getting hard, so it’s inevitable that you’ll need to take out a loan. But many people get a personal loan without first carefully making that decision. There are all different types of loans for you to choose from.
If this is your first time getting a loan, you likely have a lot of questions. We’re here to help you. Keep reading as we discuss the 9 things you should know before you take out a loan.
1. How to Take Out a Loan: Consider Your Loan Options
Every loan is different, offering different sums of money and different repayment options. There are payday loans, which are short-term and high-interest. Then there are installment loans with longer terms.
Generally speaking, there are a couple of things to keep in mind with loans:
- Larger sums of money tend to have smaller interest rates
- Smaller sums of money tend to have higher interest rates
- Larger sums of money will give you plenty of time to pay it off
- Smaller sums of money will give you much less time to pay it off
If you find a big loan with high-interest rates or a short payment schedule, that could be a bad sign. Make sure your loan fits the above criteria before you sign.
2. Determine the Purpose of Your Loan
Loan approval depends on a number of factors, one of which is the purpose. Here are the different kinds of loans you can take out:
- House/mortgage loans
- Car loans
- Business loans
Make sure you choose the right loan. If you try to take out a car loan and use it for something else, that may slow approval.
3. Factor in Your Credit
The best way to get a good interest rate is to have good credit. If you have good credit, then you’ll get the lowest interest rates possible.
However, there are still options for you if you have bad credit. Whatever credit score you may have, learn how to improve it. This includes paying bills on time and paying off loans within the agreed period.
4. Calculate if You Can Pay off the Loan in Time
Before you sign for a loan, do the math. Determine what your monthly salary is, and what other expenses you normally have. Then determine if you would be able to afford to pay off the loan in a reasonable amount of time.
It’s important that you do this because you don’t want to get trapped in a loan forever. If the loan is big, and you can only pay the minimum, the interest will add up. The interest may increase faster than you can make payments.
If you can’t make payments, you may have to default or declare bankruptcy. That could seriously harm your finances and your credit score.
5. Consider Recruiting a Co-Signer
A co-signer assumes equal responsibility and liability for a loan. That means that they’re on the hook if one or both of you cannot pay. If you need help paying off a loan, and have a willing friend or family member, this is a good option.
Co-signing also helps you to get better loan options. If you have bad credit, for example, a co-signer’s good credit can get you a better loan.
6. Consider Paying off the Loan in a Shorter Amount of Time
As mentioned before, sometimes you can get trapped with a big loan. It may get to the point that you’re only paying the minimum. At that point, you may not be able to even cover the interest.
Getting a loan and paying it off at a faster rate is in your best interest. It means you pay less interest overall. If you can afford to shell out a few extra dollars each month, you’ll reduce the financial burden over time.
7. Read the Fine Print
It’s tempting to skip the fine print and just sign. But there may be hidden clauses that you weren’t aware of. Take your time and read through the contract twice.
If you don’t understand something, ask your loan provider or a lawyer. This will help to avoid any nasty surprises later on.
8. Shop Around
Don’t limit yourself to one loan provider. There are hundreds out there, all of which offer different deals. These deals may be better than the ones you were previously considering.
Banks aren’t your only option. There are excellent online loan companies that can approve your loan in minutes. You don’t even need to leave the comfort of your home!
9. Consider Debt Consolidation
You may already have a lot of debts from multiple different sources. These may be credit card debts, car debts, medical debts, and more. These all have their own loan terms, interest rates, and payment schemes.
Why not put all of that together? As we said, a bigger loan offers you lower interest rates and a longer payment schedule. You can combine all your debt into a single loan, reducing the burden on you.
Get Your Loans With Kingcash
Before you take out a loan, you should consider the above tips. You want to not only determine the types of loans you need, but whether your finances and credit score can handle them. Make sure to shop around and choose loan options based on what you need the money for.
Finding a loan provider you can trust might seem like a daunting task. There are so many to choose from, and they all make similar claims!
Kingcash is here to help. Apply for a loan today and get the financial security you need.
