What many tend to forget about taking out loans is that the process is actually a commitment that you will make to your lender. You agreed to pay back the money you borrowed, plus interest, on the date specified in your contract. Since you are entering into a commitment, it is important that you know exactly what to expect. Here are some important things you should ask your lender to avoid surprises later on.
1. Interest rate
The interest rate will be the most basic fee that will be added to the principal amount of your loan. When checking for the interest rate, it is imperative that you take into account the APR or the annual percentage rate. The APR is the interest rate and points, as well as the fees and other charges that are applied annually.
You also want to know whether the interest rate is adjustable or not. If it is adjustable, then the next piece of information that you want to find out would be what the rate is.
Generally, the interest rate is higher the longer the loan term is. Also, it could be higher if you have a bad credit.
If it’s a home or mortgage loan, know that a percentage or percentages of the total loan amount goes to the broker. One point is equal to one percentage of the total loan. The number of points that you need to give to the broker will depend on the lender so it’s worth asking.
All loans have fees so get an estimate as well.
These are only some of the most important information that you need to know before taking out loans. You need to know these especially if you have bad credit as the cost of the loan could be higher for you.