Choosing Your Loaning Options: 3 Essential Borrowing Tips
Updated: May 7, 2021
Finding the right loan policy that fits your needs shouldn’t be a rush toward the finish line. You should temper your options and consider what strategies you can use to gain a better deal. Since it’s a long-term financial commitment, it’s necessary to look at all possible angles before committing to a deal.
The importance of being a picky consumer
Loans come in all terms and sizes, depending on how much money you want to borrow and the kind of purchase you need it for. Although you have your mindset on what you’ll use the finding for, you shouldn’t be reluctant about looking for better loan offers. Refusing to look for alternatives can be a costly mistake that will span years in repayment and regret. For this reason, it’s necessary to follow some tricks and guidelines to ensure that you’re getting the best deal you’re eligible to have.
In this article, we’ll share three loaning tips you should consider before you lock in with a loan offer.
1. Undergo several pre-qualification processes from multiple lenders
Lending companies have their individual processes in ranking your viability and credibility as a borrower through your credit profile. You don’t have to lock in with a specific lender when undergoing a pre-qualification process. Unlike pre-approval, you’re not yet applying in a particular loan where a lending company measures and analyzes your financial documents.
Pre-qualification is just a bare-bones assessment of the terms of a particular loan, from its interest rate and loan amount. Since you don’t have to submit any impertinent documents, you can get prequalified several times with no fees. You must take advantage of this by getting several estimates from different providers with similar loan terms. This gives you some insight on whether you should commit to their offers or shop for more lenders elsewhere.
2. Avoid taking out the maximum loan you can
Although you can afford to take out a large loan, it’s best to avoid doing so. This is because any financial hurdles you may have later in can compromise your ability to maintain your monthly repayment. Overborrowing can put you in debt quickly if you don’t know how to manage your finances. After doing your computations on monthly income and expenses, it’s best to set your loan repayments to no more than 10% of your monthly budget.
3. Pay your bills on time
Missing your monthly payments can lead to severe consequences, particularly on your FICO credit score. Over 35% of your credit score makes the bulk of the figure, followed by credit utilization and length of credit history. As every borrower should know, how high your credit score is will define your loan options and viability as a borrower with lending companies.
Missing payments or paying past the scheduled date can hurt your credit score and limit the perks you could have on the loan you’ll apply for. It’s better to maintain good bill-paying habits now so you won’t have trouble with your loan repayments later.
Remember to inspect the components of your loan closely. Double-check the interest rate, repayment period, and potential penalties you can incur. Looking at all the vital clauses will determine whether you should stick with your current offer or shop for other loan providers. If you don't know how to look for loans by yourself, it may be beneficial to consult with financial experts who can guide you to getting the best loans you can secure.
Mid-Town Finance Company understands your need for quality financial solutions. We provide loans in Huntsville and make our processes simple for our clients, whether for rebuilding credit or consolidating bills. Apply with our financial experts today by calling us at 256-445-9069.