Loans and Lending
Most people will look for a loan at some time in their life, and
most lenders are interested in offering customers the best possible
loan options.
The phrase "let the buyer beware" applies to any loan application
and agreement to which you sign your name. Exercise caution and
ask questions - sometimes agreeing to a loan can cost you much
more than a high rate of interest. It may cost you your savings,
car, or even your home.
Keep your eyes and ears open for lenders who offer loans on the
equity in a home, not on your ability to repay the loan. Understand
the terms of the loan. Don't sign anything until you fully understand
all terms and conditions.Pay attention to current interest rates
so that you will be able to challenge an unusually high rate of
interest. Watch out for added points to a loan, excessive fees,
and added costs, such as life insurance.
If you're shopping for a mortgage loan, ask your lender if the
monthly payment includes insurance and local property tax rates.
For instance, borrowing $100,000 on a 30-year fixed-rate mortgage
at 8% interest will cost $734.00 per month, but you need to add
both homeowner's insurance and local property tax onto that monthly
payment.
If you agree to a home equity loan to consolidate credit card
debt, remember that you're putting your house on the line and securing
the credit card debt with your home. These loans can be helpful
but require the discipline to pay the loan back.
If you fall behind in payments, more charges could be added, or
the lender may suggest you refinance the loan which lowers your
monthly payment. However, unpaid payments may be added to the new
loan amount, costing you even more money over time. If you can't
make the payments, you risk losing the items purchased or used
to secure the loan.
The reasons you choose to get a loan is to help yourself. If you
agree to an unfair loan, you may not lose everything. and even
if you don't, you will find yourself losing a lot of money that
would be better spent on the things you want and need.
Here are additional areas you may want to be aware of before agreeing
to any loan:
- Understand exactly how much the loan will cost.
- Beware of any "balloon" payments (one large payment
at the end of the loan term).
- Make sure loan fees are reasonable (in most cases,
fees should not exceed 5% of the loan amount, i.e., if the loan
amount is $70,000 the loan fees should not exceed $3500). Some
situations may cause the loan fees to be higher. If you're not
sure, ASK.
- Beware of loan offers from someone who calls
you on the phone, comes to your door, or sends you an email.
- Beware of high pressure sales pitches or any
offers that are good for only a limited time.
- Avoid loans that include extras you don't need
(i.e., life insurance).
- Fill in all spaces on an application - if the
blank doesn't apply to your situation, write in N/A.
The above information should be understood to be a general
discussion of the subject matter and DOES NOT constitute
a legal opinion about the situation. For further information
please consult a qualified attorney.
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