Sometimes life throws a curveball at you, and you lack the resources to handle it independently. Fortunately, several financing options are available to help those who need extra funds to get through a situation.
Whether you’re in the market for a replacement vehicle or just need some money to get through a tough spell, here are six important considerations to keep in mind when getting a loan.
Your credit score
One of the top factors impacting your loan options will be your credit score. Your credit score is a numerical summary of your credit history, summed up in a number that suits a range from poor to excellent. A score of 670 is considered good, and creates plenty of borrowing opportunities with reasonable terms and interest rates.
Having a fair (601-669) or poor (under 600) score doesn’t mean you won’t be approved for a loan; it just means you’ll have fewer options to choose from, and you might have a few extra conditions. According to the loan experts at Montana Capital, there are many loan options with quick turnarounds for those with less than perfect credit. Additionally, making loan payments on time will help increase your credit score and showcase that you’re a responsible borrower.
If you don’t have money to pay down existing debts, be sure that you can make minimum payments on time. Having debt is a normal part of life, but missing and late payments will worsen a bad situation.
Available options
Next, consider what options are available to you. If you’re in dire need of funds, you may feel compelled to rush. However, it’s best to slow down and do a bit of comparison shopping.
Consider the types of loans that are available based on your credit score, and do some comparison shopping to find the best possible option for your needs.
The interest rate and terms
You should always read the fine print and take the time to understand everything before signing on to take a loan. As a borrower, you have a right to ask clarifying questions and ensure you understand what you’re agreeing to. When it comes to getting a loan, there’s no such thing as stupid questions; not asking is stupid.
Be sure you understand the interest rate and terms so that you know how long you have to pay it back and what your payments will be. This information will also help you clarify the monthly or bi-weekly payments so that you know whether you can actually afford to pay it back in full.
Furthermore, you need to understand what happens if you default on the loan. If you do, you could cause more damage to your credit score, and even lose your collateral.
Contingency plans and flexibility
While you should never borrow money you can’t pay back, you should also plan for the worst-case scenario. Take some time to consider what happens if you lose your job or can’t make a payment on time. Reading through the terms and asking questions can also help you understand if there’s any flexibility for making a partial or late payment if needed.
Availability and timing
Next, consider when you need the loan and when the money will clear. Some loans take longer to clear than others. If you’re in a bad situation and need funds immediately, it’s integral to understand the turnaround time from approval.
Loan alternatives
Finally, consider what alternatives to loans are available to you. If you’re using this debt to pay other debts, you’re digging yourself a deep hole. Talk to a financial advisor to plan for the future and explore your debt consolidation options. See if there’s anyone you can borrow a small interest-free sum from to get you through. If someone is concerned about lending you money, ask if they can take you grocery shopping or pay a bill directly.
As long as you act responsibly, loans are an excellent way to fill financial gaps and secure things you can’t buy outright. The important thing is to take your time and do your research before adding another debt to your financial responsibilities.
Story by Nikita Ross
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