If you are looking to borrow some money, you can end up getting rather confused with the amount of loans out there. Choosing the right type of loan and then between the different lenders can be really difficult. Unless you have a financial advisor to help you with this task, you could find that you will be struggling to manage. There are some ways though that you can break down the task so that you can look into each part and this should help you to have a better understanding and therefore make the right choice for you. It is wise to start with finding out about what loans are available and seeing which types of lending they are most suitable for. Then once you have chosen the type of loan that you want, you can think about which lender you want to use, comparing them on price and other factors.
Find out about loan types
The best way to start is to find out about the different types of loans that are available. There are so many different ways to borrow money that it can be tricky working out which will suit you. It is important to think about your borrowing so that you match it to the right type of loan.
Amount needed – Firstly think about the amount that you want to borrow as this will make a big difference. Smaller amounts can be borrowed using an overdraft, credit card or payday loan while bigger amounts you would use a personal loan.
Purpose of loan – Some loans are for specific purposes such as using a mortgage to buy a home, a car loan to purchase a vehicle and a student loan to cover university costs. Therefore it would only be relevant to take out one of these if you were borrowing for those purposes.
Repayments – it is important to think about how you want to repay the loan. With some types, such as personal loans, you will have a fixed repayment schedule where you will need to repay a certain amount each month. With others, such as an overdraft, it will repay when the money is available and with a credit card, you will just have to repay a minimum and then can choose when you repay the rest. With a payday loan you will normally have to pay it all back in one lump sum. It is worth considering which of these repayment types would suit you the best considering how much money you have available for repayments. If you think you could manage to pay back a lot, then repaying over a short period would suit you, but if you would rather repay smaller amounts then you may need to repay over a longer period of time. It is also worth considering the cost implications of the different methods.
Cost – there will be different costs depending on the type of loan that you choose. The interest rate tends to be lower on a longer term loan, but because you have the loan for longer, the total cost of the loan in monetary terms could be higher. If you have a short term loan, although the interest rate will be high, you will normally only have it for a very short period of time and therefore this will keep the cost down. It is therefore worth comparing costs of different types of loans.
Once you have chosen which loan type will suit your needs the best, you will need to think about which lender to choose. You will want to compare them on cost and find out which would be the cheapest for you to use, making sure that you take the interest rates and any fees into consideration. However, there are reasons why most people will not automatically go with the cheapest lender. There are other factors which they will also consider when they are looking into a loan.
Reputation – many people will want to use a lender that they trust. Some lenders you may not have heard of and others you may have hear good or bad things about. It is only natural that you will be interested in the one that you have heard good things about and will want to avoid the one that you have heard bad things about. You may wish to do your own research as well though, to make sure that you really are happy with the lender.
Customer service – you may wish to make sure that the lender had good customer service. You may feel that if you have any sort of a problem and need help or just have questions, that they will be available to help you with it in an efficient and polite way.
Location – you may wish to use a lender which has a location near to where you live. You may want to be able to go into a branch and see them when you have a question or query or be able to go in and make repayments or things like that. Some people are not concerned by being able to do this though and are happy to use a telephone or communicate online.
So there are a lot of things that you need to consider when you are choosing a loan. Once you have found out about the different loans that are available and worked out which is the best loan for you, you will then have to choose the lender that you feel suits you the best. This can take a lot of time and effort and this is why some people use a financial advisor and others will just choose their current bank to help them out. However, if you do spend some time looking into it, you can end up finding a loan which will save you money and give you good value for money. Just think about what is important to you in a loan and lender and then match those requirements. With so many options available, you should be able to do this and get a loan which you feel will really suit you.