It’s important to ask the right questions, especially regarding finances. Of course, it goes without saying that this also applies when taking out loans. When shopping among local money lenders, you must make the right inquiries to know which one to take out a loan from, and what kind of loan best fits your financial needs. Here are a few examples of the questions you should be asking in order to make the best decision as a borrower.
Interest-related questions
Interest is the biggest factor that increases the cost of the loan. Thus, it’s only natural that questions about it are one of the first things every borrower should ask. Knowing how it would affect the loan’s total cost would help set your expectations for how much you’ll pay back and help you prepare your finances.
It would also be helpful to ask about specifics regarding interest. An example of this is loan tenure. What you need to know about this is that factors such as the borrowers’ credit profile, income, retirement age, employment status, etc. affect it. In turn, loan tenure affects the loan’s overall cost. The longer the tenure, the more the borrower ends up paying.
Another thing worth asking is whether the interest rate of the loan the lender offers is fixed or variable. This way, you won’t be surprised if the payment goes up.
How much will the fees be?
Every loan comes with fees. After all, moneylenders are ultimately businesses. To continue their operations, they must pass on some of the costs to the borrowers. These include origination fees, also known as processing fees. depending on how serious the borrowers are, like late penalty fees, prepayment fees, or foreclosure fees. Some charges, such as closure charges also protect the borrowers themselves, If you are about to commit to a loan, here are some fees you have to be familiar with so you can expect or avoid them.
- Processing fees: Administrative expenses passed on to the borrower, they vary depending on the lender. For example, for the processing fee of 2% of a $15,000 loan, you should expect to pay $300 up front.
- Prepayment fees: If you have a specific request, such as transferring the current balance of an existing personal loan to another money lender, the first lender can grant you the loan at a favourable date. Money lenders charge prepayment fees when transferring funds. However, not all money lenders rely on this fee, and some may already charge penalty fees. But it is not false to say that it will be good if you are also prepared to pay this fee.
- Penalty fees: If you are new to loans, you may have no idea that some loans have penalties if you repay them early. And once you get trapped in this, it will discourage you from paying off your debt faster by exceeding the total amount of the loan.
Money lenders ensure that you pay the loan amount in modest instalments on time, neither late nor early. This is because much like late payment, early payment of the entire loan also comes with a penalty.
What are the consequences of missing repayment?
One of the most common mistakes borrowers make is late payment. This leads to late repayment fees as well as damage to your creditworthiness.
It’s common knowledge that late payment comes with fees, but it still helps to ask the lenders about its consequences. It also helps to be open to your lender if you cannot make a payment at a particular period, as they might be able to accommodate you. However, please note that they can only do so occasionally, so you should strive to be financially responsible.
Conclusion
Asking these questions can be a huge help, as they can save you from being caught unprepared. Understanding and expecting interest rates, and fees can help you to be a well-informed borrower, which in turn will make you confident – something you should be before taking out a loan from a licensed money lender in Bedok.