Whether you are looking to start a business, put your kids through college,
or purchase your first home, if you are like most Americans, chances are
you probably do not have all the cash you will need to cover your costs.
In situations like this, you will need to take out a loan to help you
accomplish your goals. Taking on large amounts debt can be a major responsibility,
as you are promising to pay back the principal amount plus interest over
a certain period of time. Before you sign your name on a loan agreement,
it is important you consider the following.
1. Check your credit score: Before you even apply for a loan, consider your credit history. Your
credit score will have an impact on your ability to get credit and how
much it will cost you. If your credit score is low, try to raise it before
applying for a loan by paying off debts, correcting inaccurate information
on your credit report, and making payments on time.
2. Secured or unsecured: There are two major categories of loans: secured and unsecured. Secured
loans are backed by some form of collateral that the lender may seize
in the event of the borrower’s default, such as a person’s
home or vehicle. This added security usually makes secured loans cheaper
in the long run, though borrowers stand to lose whatever they put up as
collateral. Conversely, unsecured loans are not backed by any sort of
collateral, meaning that the lender does not have any guarantee of repayment.
Because of this risk, unsecured loans generally have higher interest rates.
If you have good credit and you are sure you can pay off the loan in time,
a secured loan may be the more attractive option.
3. Consider a credit card: A loan may not be your best option if you have good credit. If your credit
score is excellent, you may be able to apply for a credit card with zero
percent interest for the first year or even longer. Likewise, interest
rates on personal loans may be higher than that of some credit cards.
It is important you consider all options before deciding which form of
credit you will choose.
4. Read the fine print: It is important you check to see if the prospective loan has any limitations
or caveats, such as how the money can be spent, whether or not the loan
can be repaid quicker than the stated time period without penalty, and
how long it will take for you to gain access to the funds. Likewise, make
sure you know what could happen in the event that you should pay late
or default on your loan.
5. Avoid applying for too many loans: Whenever you apply for a loan, the prospective lender will check your
credit history. This inquiry can lower your credit score by a few points.
The more places you apply for loans, the more times your credit score
will take a hit, thereby affecting your ability to qualify for the best
interest rates. To avoid this problem, ask lenders about their rates before
submitting an application and only apply for the best ones.
Bankruptcy Lawyer Serving Fort Worth
If you are struggling with debt, the knowledgeable
Fort Worth bankruptcy lawyers at The Pritchard Law Firm can help you reorganize your finances and get
you on the path towards financial freedom. Having helped countless clients
overcome their debt throughout more than 45 years of combined legal experience,
we have what it takes to help you get the results you need.
Call (817) 727-4001 or schedule a free consultation
today to discuss your situation.