If you are having money troubles or want to refinance your current debt, there may be a loan product that fits your needs and your ability to repay. As no two loans are alike, it is important that you research the pros and cons of each option before you decide to borrow money. How do you know if a given loan is right for you?
What Is Your Goal?
Those who are trying to consolidate their debt may want to do so through a home equity loan or a credit card balance transfer. Borrowers who are looking to buy a car or home will want an installment loan with a low interest rate. Anyone who is looking for quick cash to pay a bill in a timely manner may want to consider a personal loan or a payday loan.
What’s Your Credit Situation?
Borrowers with good credit can generally get a credit card, an installment loan or a personal loan with favorable terms. This means getting an unsecured loan or a loan that requires no additional collateral other than the asset being purchased. Those with average or poor credit may pay higher interest rates or need a cosigner, which means you want a loan that doesn’t need a credit check or any minimum down payments to get approved.
What’s Your Timeline?
Installment or consolidation loans are best for those looking to pay off their debts as soon as possible. Revolving loans like a credit card can be problematic because there is a temptation to only make the minimum payment. It may also be tempting to use that loan to make frivolous purchases that do nothing other than to create new debt that you may not be able to repay. However, if you are looking to spread your payments out to lower your minimum monthly payment, a revolving loan or line of credit may be your best option.
Who Are You Borrowing From?
If you are making a big purchase like a car or house, you should go through a broker. A broker will be able to scour through dozens of lenders and loan programs to help you find the one with the best terms. Depending on your credit and timeline, it may be better to borrow from an online lender or credit union as opposed to a larger bank that may have stricter lending criteria.
There is a lot to think about when choosing a loan. You have to make sure that you can pay it back in a timely manner, that the interest rate is reasonable and that you don’t have to put down collateral if possible. Therefore, it may be best to research your options online or talk with a loan officer before choosing to borrow money.