December 4th, 2020

How to Choose the Right Type of Loan

Most of us have had to borrow money at some point in our lives, to help us pay for the things that matter. From parents lending us cash to make ends meet, to student loans for school, and everything in between, loans are a common tool that people use to manage their finances. However, there are many different types of loans out there, so it’s always a good idea to know what you’re getting into before applying.

December 4th, 2020

How to Choose the Right Type of Loan

Most of us have had to borrow money at some point in our lives, to help us pay for the things that matter. From parents lending us cash to make ends meet, to student loans for school, and everything in between, loans are a common tool that people use to manage their finances. However, there are many different types of loans out there, so it’s always a good idea to know what you’re getting into before applying.

What You Need to Know About Borrowing

Difficult seasons come in life where you may find yourself needing a little help financially or may need help paying for a large investment such as a car or a home. A loan or a line of credit can often be the quickest and easiest option but there are tips and tricks that you should know beforehand. It is important to educate yourself on interest rates, the difference between secured and unsecured loans, and to have an established budget for repayment. One of the best pieces of advice is to take your time and shop around for loans. If you rush the process, you may have missed hidden fees and terms that will have you paying the price for years to come.  

Advice for Borrowing 

  • Always pay attention to the full repayment amount. In some cases, it may be better to go with a shorter repayment period, rather than a lower APR amount. 
  • Make sure that you educate yourself on secure loans versus unsecured loans. A secure loan means that if payments are missed, you run the risk of losing your home.
  • Be sure to have an established budget ready so that you can afford the repayments.
  • Don’t jump into a loan without looking at options. Often times, the sales team may offer a loan that is much more expensive than a loan from a different provider
  • If you are taking loans out to pay off existing debt, tread lightly. This may sound great in the short term but could create a larger issue in the long term.
  • Do not be fooled by interest free deals. These are only free if you pay them off within a certain time period. Once that time period is over, the interest rates skyrocket. 
  • A good rule of thumb is to pay 10% of the balance of your credit card every month. Paying the minimum amount will keep you stuck paying forever as interest continues to accrue.

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Looking for more info?

Our experts are here to help. If you have any questions or concerns about borrowing, reach out to Tips on Borrowing today.