What You Need to Know Before Signing a Loan

These days, it’s easier than ever to get a loan. That’s good news because nearly everyone needs one at some point – whether for a home, a car, an education, or even a holiday. But there’s a downside. Because obtaining a loan is so easy, many people often go about it the wrong way. They don’t do their research, they don’t ask for professional help, and they often get in over their heads. This guide has been written to ensure that won’t happen to you.

Make sure you’ve got the essentials covered

That basically comes down to being absolutely positively completely certain that you’ve found the best possible rate on your loan, taken into account your long-term plans, and planned for any potential pitfalls. You should have a clear idea of your long term budget to make sure you won’t miss any payments. What’s your credit score like? Have you checked it for errors? A good score will bring down the interest you pay on your loan. (This is a good time to remind you that your credit score can be improved in months through measures as simple as paying your bills on time.) If you have any outstanding debts, clear them now. Finally, all your paperwork should be in order and stored in a safe place. Your paperwork is your best protection against future complications.

Don’t be afraid to ask questions

When it comes to applying for a loan, no question is wrong. Don’t worry about appearing ignorant or irritating. Both are preferable to worrying about how on earth you’ll meet your payments a few months down the line. Make sure you have clarity on technical terms – your annual percentage rate (which is actually more important than the interest rate most people focus on), your long term interest rate (if you opt for a variable one), early repayment charges if any, the final closing day price (which might include unexpected fees tucked away in the fine print), and your payment schedule and payment method.

Read the forms beforehand

The day you sign your loan is going to be a busy one. There will be plenty of forms to read and sign. You won’t have time to go through them all carefully so put in a request that will enable you to see the paperwork days in advance. This will allow you to review it at your own pace and also give you time to show it to a professional who has had more practice than you at examining fine print.

Get another pair of eyes to help you out

Preferable a pair that belongs to a lawyer or financial advisor. This will help you safeguard yourself against any sort of error. It also means that all those complicated caveats and intricate footnotes by an impartial third party whose main interest is looking after your own, saving you plenty of time and worry. Ultimately, irresponsible loan taking is a shaky road that often ends in a mountain of debt. But a little bit of research, taking your time, and consulting a professional all play a part in making sure you never need to walk down that road.

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Charlie J. Thompson
Charlie is a financial analyst turned writer His mission to provide general knowledge about the world of finance to help people from non-financial backgrounds make informed financial decisions.


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