Getting a loan is really only half the story and before you get to the point of making your application for finance you need to be sure that the lender you are approaching is right for your circumstances and is a good fit all around.
When reviewing Lendingtree, for example, you will discover that the site doesn’t offer loans itself but provides a gateway to a suitable lender once you have provided some personal and financial information, which should pinpoint a finance deal that suits your particular criteria.
This is just one example where it pays to know about which lender to approach and why a particular loan provider will be just right for you, especially when you consider you don’t want to be making lots of different applications for the same loan as this could be bad for your credit score.
Here are some pointers on how to choose the right loan provider.
Getting a mortgage
The biggest loan that you are ever likely to apply for is a mortgage and this is one type of finance deal that you really have to get it right first time.
You will be paying a mortgage loan for a period of time that stretches from anything between fifteen and thirty years, on average, so you can appreciate that it is critical that you get a deal that works for you and your finances.
There are several key things you can do to get in shape before you make your application and the answers to these pre-qualifying questions and checks will help guide you in the right direction, as well as telling you what sort of loan deal and interest rate you might be paying.
The first thing to do before you apply for any loan, especially a mortgage, is to check how good your credit score is and what sort of borrowing power that number is going to be giving you.
If the score is lower than average that will have an impact on your chances of getting a loan and what rate you will be paying.
As already highlighted, your credit score will be an influential factor in deciding which lenders you can apply to and what sort of interest rate you will be charged on the loan.
When your score is lower than ideal you might still get offered a loan but the interest rate might be higher, which is a reflection of the higher risk you are perceived to pose to lenders of not paying them back.
Having got that part of the process sorted, you can start to shop around for the best rates available on mortgage deals you qualify for.
It is important that you compare rates and don’t just go for the first deal you see, as even a small difference in your interest rate can add up to a lot of money over the term of the mortgage.
Know in advance that you can get the deal
A good practice to follow when applying for most types of finance is to consider getting pre-approved for the deal before you go ahead and make a full application.
This tactic creates what is known as a “soft” search that doesn’t show up on your credit file and it will tell you if you are going to be accepted when you make a full application for finance.
Getting pre-approved lets you know that you should be able to get the deal you want and helps avoid the scenario of several applications for finance showing up on your credit file, which worries lenders and might even harm your chances of getting approved in the short term.
Always ask about fees and check the fine print
Most of us are notoriously bad at checking the fine print of a contract we are being asked to sign and we tend to make the assumption that it is probably ok to sign on the dotted line rather than attempt to wade through a few pages of legal gibberish.
The problem with that approach is that some lenders might have put some terms and conditions in their agreement that you are not happy about or could be charging some fees and costs that you don’t really want to get charged, which could happen once you have signed.
Always check the fine print, no matter how dull the task is, and don’t be afraid to ask questions and politely challenge or clarify any aspects of the finance agreement that you are not sure about or are unhappy with.
Not all lenders and finance agreements are equal, which is why you want to find one that is offering you terms that you are happy with.
Ask about repayment charges
Your financial circumstances can change and it might be the case that you want to repay a loan early to save some interest charges.
Even if you think that it is not that likely you will want to or be able to repay the loan back before the original final settlement date it does make sense to see if that is an option and find out what charges, if any, there are for doing that.
It sometimes pays to take out a larger loan
You might think that suggesting you borrow a larger amount than you intended is not a prudent suggestion but there are some circumstances when that decision might actually turn out to be a smart move.
As a general rule, the interest rate you will be charged on a personal loan might be slightly lower if you are borrowing a larger amount.
It is worth checking what the thresholds are for the loan rates and if you need to borrow a little bit more to qualify for a more competitive rate it could turn out to be a better deal.
That lower interest rate will mean that your whole loan could be cheaper than if you borrowed a lesser amount, so be cautious with your borrowing, of course, but do check whether it might pay to borrow slightly more.
The key to finding the right loan provider is often about doing your research and being prepared to shop around, but it also involves doing the groundwork like checking your credit score so that you know what sort of finance deals you are likely to get approved for.