At some point you undoubtedly will find yourself applying for some sort of loan. Whether it’s to finance the purchase of new home, to help you start a business, or simply to tide you through tough economic times, this will be a very important process for you. Learn tips and strategies to make the process easier.
Decide on the amount of the loan. Determine how much money you need to borrow. If you are using the loan to purchase a house, take into account all the extras that will be enveloped into the loan amount such as fees, insurance, escrow money, and taxes. For the start-up costs of a business, do research to find out how much money you will need.
Decide on the type of loan. Depending on the interest rates available and your goals for paying down the loan, many types of loans are available. There are fixed rate loans, adjustable rate loans, and combinations of the two. There are also loans of different terms, usually 10-year, 15-year, and 30-year. If you need a home equity loan to make repairs to your house, the term will be less than the term on a loan to finance the purchase of a house. Also decide whether you want a secured or unsecured loan. For explanations on the different types of loans, visit thinkmoney.com and mortgage-x.com (see Resources for links).
Search for a lender. If you need a student loan, start by visiting the National Student Loan Data System (see Resources for links). If you need a home loan, search at American Loan Search or visit your local bank. For business loans, contact the business banking division of your local banks.
Shop around. Research the rates available and ask for rate quotes from several banks and lenders. Make sure you are comparing apples to apples — the rates available on a 10-year loan will be different than those on a loan with a 30-year term. Also ask about the associated fees. See who provides the best rate with the best terms.
Fill out an application. It will list your personal, financial, and employment information. A credit check will then be run.
Wait for favorable rates if possible. Interest rates fluctuate so you need to be aware of current rates and what is a good deal. If you get good advice and time things right, sign your loan when rates will be at the best level for you. One great site to check out is Bankrate.com. See Resources for link.
Sign the papers. Meet with your lender at his or her offices or in your home to do the final paperwork. You will sign quite a few documents to complete the loan. Have blue ballpoint pens and your identification on hand. Be sure to find out when your first payment is due and where you will need to send it. You will want to start things on the right foot and keep up with all payments until your loan has been repaid.