Loans are great choices when you want to develop a major project (like buying or building a house or buying a car). Knowing how to manage your credit options and choosing the loan that best suits your needs and your payment capacity is the best way to ensure that you won’t end up in huge debt.
There are many types of loans. The interests, conditions and amounts vary from institution to institution. The main features that you have to take into consideration before applying for a loan are the following:
The type of loan
There are several options according to your needs and what you plan on doing with the loan. Some of the most common ones are:
Personal loans: you can use them for whatever you need. This type of loan is not under warranty and that’s why the interest rates may be higher.
Mortgage loans: they are intended for buying a property. The property will be under warranty if you’re unable to pay off the loan. Analyze your options well and choose a mortgage loan that you can afford in the short term, since the market fluctuations can generate an interest debt that you’ll be unable to cover with the cost of the property.
Vehicle loans: designed for buying a vehicle, they can be used for a new vehicle or a used one. They usually ask you for a percentage of the value of the vehicle and then you’ll pay monthly fees. Look for fixed-rate loans: this way, your monthly payments will always be the same, guaranteed.
Business loans: they’re used to develop a project, like a working capital. There are specialized SME loans that offer a very low interest rate and are very suitable for opening or growing a business.
APR
It’s the interest rate that’s applied to a loan for a whole year. You have to pay attention to the information related to the APR you’re going to have to pay and choose the product that fits your budget.
Costs
Another important point to consider are the administrative and maintenance costs of every type of loan. The difference in costs can be considerable among financial institutions, so asking for information related to costs should be a priority before selecting a loan.
Guarantees
In the majority of cases, you will have to pay a guarantee in the event of disability or death, so the financial institution will be sure that the loan will be paid back to them. Part of the cost of your loan includes the payment of the guarantee and it’s important that you know the conditions to be able to use it if necessary.
If you want more tips, subscribe to the Family & Money Matters Institute or follow me on Twitter and Facebook. See you there!
