A loan from a bank may be for buying a home, auto loan or a business loan. In all these cases you need to consider certain things before going ahead. Some of the processes are the same in all cases, but on most points these three major types of loans differ in rates, payment cycle and the approval process. Hence we should treat these loans separately and consider taking the loan after looking through some important points.
Important things to consider when getting a bank loan for your home:
- Get it from a trusted partner – Home loans are long term debt and a certain amount of trust is required to get the right loan for you. It is not about the rate of interest alone, but about the right advice how much loan you should take and what should be the tenure. The best place will be the bank you have an account with, and they are also most likely to give you the best offer too.
- Do not buy online – Short term loan can be bought online, but mortgage is not the debt to be bought online. There are many variables you will not understand while applying online. You should research online, but always take a face to face advice before buying.
- Avoid interest only loans – Unless you are using the interest only loan to migrate from one Mortgage Company to another do not use it. Interest only loan does entitle even apart of the property in your name. You are just paying the cost of borrowing and the Principle amount stands there.
- Consider all costs involved – Mortgage has application fees, processing fees, documentation fees, underwriting fees, escrow fees and pre-payment penalty as well. Consider all costs and discuss with your advisor about discounting these fees initially as this will help you save a lot of money.
Important things to consider in case of auto loan –
- Include insurance – Auto loans should have insurance bundled with the loan. This will save you some extra dollars on buying insurance. Yes you will have to pay the premium but the insurance bundled with a loan will not expire. Since the premium is paid along with the EMI for loan you will not feel the extra pinch of paying for insurance.
- Try to reduce the tenure – It is better to reduce the tenure of an auto loan. The longer the tenure the more interest you are paying. Hence the best way is to calculate the least amount and tenure you can take. You will be saving a lot.
- Use the internet – Auto loans can be bought online as only a few variables are involved. You can always use the internet to compare the rates.
Important things to consider for business loans –
- A solid credit history – While processing a business loan, banks look up the credit history of the individual and the business. If the business is having a strong credit history, disbursement will be very easy. In case of a new business the proprietor/partner should have a strong credit history.
- Choose the right lending company – Depending on the amount of loan requirement you should choose the bank. Big bank are not very keen on providing small loans and you should choose a growing or mid-sized bank.
- Pay back before the tenure – If possible try to pay back the loan before the tenure. This will strengthen your credit history and you can get bigger loans easily, as paying back before the tenure shows the healthy state of your business.
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