Nowadays, you can get loans from banks and private lenders˳ However, when you apply for a loan, you need to follow a few important things that can help you compare short-term loans˳ Given below are 8 factors that should be considered when making a loan comparison˳
Type of Loan
First of all, you need to consider the type of loan you need˳ For a short-term personal loan, you need not to submit your collateral deposits˳ All you have to do is show your income statements and business proofs˳
On the other hand, for a business loan, it’s important to mention the purpose regardless of the loan term˳
You have to analyze the purpose of your loan amount˳ The loan may be taken out for various reasons˳ It could be a wedding loan, holiday loan, payday loan, student loan, etc˳, Choose carefully with regards to your needs and requirements˳
Interest Rate
Another factor to consider when making the comparison is the rate of interest˳ Different rates of interest are offered by different private lenders and banks˳ If your credit rating is poor, you may be charged a higher rate of interest˳ Therefore, it is necessary to compare loans before you settle down for your final option˳
Term of Loan
Typically, people apply for a short-term loan as they need to fulfil their short-term or immediate monetary issues˳ All they do is use the money and pay it back within 12 months˳ But if you find a loan that features low-interest rate, you can figure out the EMI and then compare it with the other loans˳ It is not necessary that a person has to opt for a loan with for 12 months˳ The borrower may decide the tenure depending upon their repayment affordability˳
Hidden Charges
When applying for a short-term loan, make sure you know all the fees˳ Usually, lenders charge many types of advance charges, such as credit report charges, processing fees, admin fees, underwriting fees, appraisal and origination fees˳ Ideally, you might want to avoid these fees˳ Choose a broker or lender who does not charge any upfront fees as this will help you in saving money˳
Down Payment
For short-term loans, you may have to make a down payment˳ Although these loans don’t require down payment, home loans or car loans do require an upfront payment˳ This amount is typically between 5 and 10% of the loan amount˳
Some lenders can provide 100% finance facility as well˳ In this case, you may have to pay additional interest˳ Therefore, you should figure out and compare the amount of interest and then make a choice˳
Repayment
Make sure you figure out your repayment ability prior to applying for a short-term loan˳ You may have to pay a huge amount of EMI and figure out your repayment capacity˳ It is wise to map out the repayment strategy as irregular payment behaviour will damage the credit score˳
Credit Rating
Your credit rating plays an important role when it comes to getting a short-term loan˳ If you have a poor credit score, make sure you work on your credit rating first˳ For this purpose, you can get in touch with your tax consultant as he can help you build your credit score˳ If a lender charges a lower interest rate despite your low credit rating, go with them˳ Also, regular repayments of the loan on time and in full will also help in building the credit score˳
Secured Loan
Secured loans can be a good choice for you if you can repay your loan within 12 months˳ In this case, make sure you mortgage your property papers or assets to the loan provider˳ Once it’s done, your loan will be disbursed in a few days˳
So, if you need a short-term loan, make sure you consider the 8 factors described in this article˳ They will help you get the right type of loan and avoid the most common mistakes at the same time˳ Hope you will be able to get the right type of short-term loan with these tips˳
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