Ready to take out a Loan?"

Today we have a guest post written by Sarah Scrafford
--------------------------------------------------------------------

The old adage “Neither a borrower nor a lender be” holds no water in today’s world. What with credit cards and loans, people are spending money that does not belong to them, at a premium of course. Not all loans are detrimental to your debt status, not if you are shrewd and careful both at the time of borrowing the money and as you repay both the principal and interest. It’s best to be armed with all the information you can garner before you choose a lender and settle on interest rates, and here are a few pointers to get you started:


The first thing you need to decide is the quantity, the time factor, and the interest rate – how much you need to borrow, what interest rate you’re willing to pay, and how long you need to pay back both the principal and interest. Settle on lower monthly installments and a higher amount in the long run rather than risk defaulting or delaying even one payment as this could cause repercussions on your credit history.
Ask your lender about additional fees that are hidden in the fine print. You would think that it’s to your benefit to repay the amount you’ve borrowed at the earliest so that you reduce the interest owed. But since lenders make their money off the interest, paying off your loan early make incur a penalty of some sort (Yes, I agree, it’s not a fair world). Spend some time in shopping around for a loan that allows you to repay as fast as you can afford to.
Read the loan documents carefully before you make a decision. Typical APR (Annual Percentage Rates) are not offered to all customers. A lender is within the law in quoting you a higher rate of interest than specified by the APR based on your income, ability to repay, credit history and job security. Only 66.66 percent of a lender’s clientele needs to be offered loans at the APR, so based on this figure, a lender may refuse to consider your patronage if you’re a credit risk.
Some lenders offer lower interest rates for higher borrowings. Find out how much more you need to borrow to take advantage of lower repayment rates and choose the option that lets you repay a smaller amount.
Repayment holidays may be a godsend when you’re running short of money during payment time, but remember, the interest you owe does not take a holiday during these days. In fact, every extra day you take to pay off your loan adds more dollars to the total amount you need to repay.
Pay off secured loans diligently and without delay or you will end up losing the piece of property you pledged as collateral.
Non-payment of unsecured loans can also lead to the loss of property if you own any. Your lender is well within his rights to file a charging order which means you have to repay the money you borrowed with the proceeds from the sale of the property, if you decide to sell it. Once a charging order has been granted, your lender will apply for an “order for sale”, which if granted, forces you to sell your property and pay off the lender.
Be careful when you transfer balances to zero percent balance transfer cards – the low repayment rate is for an initial period only, after which interest rates are extremely high. So try and pay off the entire amount before the high rates kick in.
Interest rates are much higher on unsecured loans.
If you have any trouble meeting your monthly payment schedules, talk to your lender beforehand and discuss the reasons why. You may be able to work out a solution that’s mutually beneficial instead of defaulting and hurting your credit score.

By-line:


Sarah Scrafford is an industry critic, as well as a regular contributor on the subject of Small business. She invites your questions, comments and freelancing job inquiries at her email address: sarah.scrafford25@gmail.com.