Friday, May 29, 2009

Tips : How do you find the right loan?

We always seeing many advertisement about loan. They offer very much "benefits" for us. So we should to know about How to find the right loan for your financing.
Our life is really unpredictable,. there are so many changing in our life. We should to realized about our situation and what is the trigger to make us need loan. A personal loan could be for a car, home improvements, business improvement, or even to pay off credit card bills in one go, allowing you to spread the repayments over a longer time at a lower interest rate. But we should to choose the best trigger when we need a loan.. We should to ask to ourself,: "Is it urgent?", "If it is not urgent, is it gonna make me better than now for everlasting or only for temporary?".
After deciding to take a loan, you should to compare the key issues to consider when choosing which loan to take out.

Borrowing limits
You can generally get up to £15,000 - but some lenders offer up to £25,000. You can often get approval in principle over the phone with the money available in just a few days.

Loan terms
Some lenders will give you a loan for as short a period as six months, although a year is more common. The maximum length is usually seven years, although some firms will lend over ten. Personal loan make the most sense for people who want to repay something over a few years. If you only need the money over six months using your credit card probably makes more sense.

Banks, building societies and, increasingly, supermarket chains offer personal loan at competitive rates. Avoid loan from small firms that you have never heard of - this is a lightly regulated area and some of these loan can carry high interest rates coupled with heavy redemption penalties should you decide to move your loan to a cheaper firm.

Reputable firms generally charge penalties of no more than two months' interest if you pay off the loan early. Shop around - your mortgage lender may offer you a preferential rate, for example, but you might still be better going elsewhere.

Rates are generally fixed for the duration of the loan, which means you know exactly how much you will repay each month. The disadvantage is that you could be paying more than borrowers who take out a similar loan in six months' time - on the other hand you could pay less.
1. A fixed rate loan can provide you the security of an unchanging fully amortized payment. The typical term of the loan is 30 years. This type of loan usually works out best for those who plan to stay in their home for the long-term.

There are variations to the 30 year loan. A 15 year payment term allows you to pay less interest for the life of the loan, you could save hundreds of thousands of dollars in interest paid over the life of the loan, but you will be making larger payments.

If you're not comfortable with larger payments you can still save money paid in interest over the term of the loan and shorten the life of the loan by several years. Simply divide your monthly payment by 12 and add that amount to each monthly payment making 13 payments instead of 12 for the year.

Choosing a 40 year term will give you a smaller monthly payment but you will also build equity more slowly and pay more in interest during the loan's term.

A multi-year fixed rate loan with a balloon payment offers lower payments and usually has lower closing costs. You will definitely want to refinance the loan prior to the balloon payment due date though!
2. Choose a buydown loan if you feel the need to ease into making full payments. You may be able to temporarily buy down the interest rate for the first two or three years of the loan. For example, the first year you might pay 3% interest, the second year 4%, the third year 5% and finally the full 6% the fourth year and from then on for the life of the loan. These loans are fully amortized. Be aware that lenders charge you up front for this option.
3. Interest only loans provide a smaller fixed monthly payment to begin with, making payments of only interest with no principal amount included. The loan then resets, usually at the end of a five or ten year period, to cover both principal and interest for the remaining 20 or 25 years of the loan term. These loans are also amortized over the full term of the loan.

Interest only loans are also available at adjustable rates. Ask about the adjustable rate reset periods and interest rate caps.

Either way, you do not have to worry about your repayments soaring. Many lenders will insist that you take out a direct debit for the repayments.

Generally, the interest rate falls if you take out a larger loan. The crucial rate to look for is the APR - annual percentage rate - which includes the effect of any arrangement fees you have to pay, although few lenders actually charge these today.

Credit checks
Lenders want to make sure that you are a good risk and do not have a history of bad debts and unpaid loans behind you. To do this they will check your entry on credit registers. A poor credit record won't necessarily prevent you from getting a loan, but you will probably have to pay a higher interest rate. You may find it harder to get a loan if you are self-employed or are on a short-term contract.

Unsecured loans
Unlike a mortgage, this type of loan is not secured on your home. If you fail to repay the loan, the lender cannot repossess your home. That is why the interest rate is higher than for a mortgage.

Loan protection insurance is offered with many loans, otherwise called Payment Protection Insurance (PPI). This covers your loan if you are unable to meet the payments because of unemployment or ill health. Think carefully whether you really need this cover or not. It is often expensive, and if your financial situation is precarious, should you be borrowing even more money?

If you do want the insurance, ask about exclusions and small print which could make it hard for you to claim.

Some lenders do not show the cost of the insurance in the monthly interest rate you are quoted. However, following a long-overdue change, lenders must now show the whole cost including the insurance in their APR. This makes a comparison based on the interest rate much easier and gives you some idea of the real cost of the loan plus insurance.

The sale of PPI alongside loans will be banned from October 2010, but be aware that, until then, these policies are usually expensive as well as unnecessary.

Before you take a loan, please make a planning about payment schedule, and remember to pay your loan as best as possible.

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