The keys to hiring a personal loan and consumer
Author: Veren Carolina
During the life of any person is a series of more or less regular expenditure to which it is hard to deal with cash. The house and the car are the first in this list, but there are many other cases in which funding may be necessary or advisable from a financial standpoint. A computer, vacation, college, home furnishings …. are just some of these acquisitions are usually done on credit or borrowed funds.
There are different ways of accessing this money, although the most common are through a credit or a loan, but two concepts are commonly used interchangeably refer to different operations . In fact, a personal loan is simply a contract by one party, usually a financial institution, delivers to the other an amount of money that is repaid on a regular basis according to agreed conditions. That is, a capital that left a customer and this must be returned with a range of interests.
Most people are familiar with the concept of personal loans on mortgage loans first and second because it is a rare case who has not had to seek external financing reached a certain point in their lives. And there is always a relative or close acquaintance that if you had to. When hiring a personal loan on the one hand there are a number of factors related to the product itself and others with the negotiation and searching for the best deal.
Loan Characteristics
Before you even to find and buy offers to know what elements make up a personal loan. And in the end the best way to choose is to know how the financial product in question:
The loan amount : refers to the amount the entity makes available to the client. Although there is no legal limit, the minimum amount of personal loans is usually set at around $ 3,000, although there are specific products such as the advancement of lower payroll amounts. The amount requested will largely determine the interest rate of the operation. As a rule, the higher the level the more interest there will be amortized.
The interest rate : refers to the ‘price’ to be paid to the lender to lend money. The interest rate determines the percentage of the amount borrowed will be satisfied. Unlike what happens with mortgages, personal loans are usually signed at fixed, variable, although the formula has grown in recent years. The loan term is usually a good yardstick to determine the interest rate (fixed, variable or mixed) best interest. Financial institutions generally offer fixed rates for short-term operations and more variable for which lengthen in time.
The loan term : refers to the time set in months and / or years during which the loan is repaid. As a rule, the minimum term of repayment is usually six months and a maximum of ten years, but most loans are returned within five years. The term is the usual formula for determining the amount to be paid monthly to the bank, although in this respect to know that the longer the greater the amount of interest you will end up paying.
Fees : Like all financial products, personal loans are subject to payment of fees to financial institutions. The number of committees depend on the bank or savings, but may be charged as follows: study commission, fee, commission modification or change conditions of security, early partial redemption fee and early termination fee. Explains the Guide to Personal and consumer loans of the Bank of Spain there is a maximum for some of these commissions as with early termination that consumer credit may not exceed 3% fixed rate operations or 1.5% in interest rates.
How to assess a loan
The standard formula for valuing a loan is the APR or Annual Percentage Rate . The APR states the interest that will have to face during the life of the loan and which will serve to compare different offers from a strictly financial point of view. In fact, this tool provides what will be the actual cost or actual operation in a year period and financial institutions are obliged to report this rate to advertise your supply.
The APR is more relevant in the consumer or personal loans, and that the introduction of fixed rate does not change throughout the life of the loan, which does happen with the type variable, ranging interests in relation to benchmark index. In any case, we must bear in mind that should not be compared different types of loans to each other.
Apart from SAD , there are other elements that also can be assessed for a personal loan as the aforementioned repayment term, which will help reduce the monthly payment or prepayment penalties. Payment facilities, with grace periods are another factor to take into account. Additionally, there will be another series to estimate the recruitment requirements of other financial products that can bring down the APR but also have a cost.
Formula to lower the loan
Although often presented as a sealed bid, most financial institutions agree to negotiate the terms of his personal loans. Negotiating fronts are usually limited to two, and linking payment guarantees to the bank.
The first relates to the guarantees provided by the client. The higher your credit is, the easier it is to negotiate a discount. Apart from property and other assets, it is always good to have a guarantor to provide additional security to the bank to soften. The same goes for insurance or payment protection plans, increasingly common, and that protect the institution and the user’s family and ensure payment of the debt in event of a sudden.
Such insurance or payment plans are within the range of additional financial products that can serve to reduce the APR , which is more common in mortgage loans. Basically, this is to increase customer loyalty to the institution. In fact, whenever it is often easier to get capital in ‘the bank of a lifetime. ” So the first requirement for access to finance is to open a bank account. From then on the payroll and receipts will be the weapons of the client to improve credit conditions. Thus, if household access both elements may get a rebate of SAD , although increasingly more institutions for which clearance is a condition sine qua non for granting the loan.
In addition, the hiring of a pension plan, mutual fund and other elements that tie the customer to the bank can help improve conditions.
How to find the best loan
In fact there is no magic formula for finding the best loan, just a series of general guidelines that can assist or guide:
Information in advance : as already noted, before visiting any entity should review the concepts that make up the loan in order to negotiate better conditions.
Define objectives : the banks have different types of loans based on the use to which it will give the money. It is not the same apply for funding to buy a car to go to college or to reform housing. Each of these assumptions provide a TAE different and so before going to the bank must be clear why the loan is requested and offers related to that need.
Reviewing the supply market : a web-first and then going directly to different banks. Can be positive even go to several branches of the same institution in search of information. Obviously the top of the list must be the usual bank, which in theory will be more likely to access the customer’s needs, especially if it has a good credit history.
Compare deals with patience : as far as possible we must avoid rushing and to compare the number of bids as necessary.
Select the best deals and bargain : all the information obtained should select three or four most attractive and go straight to the action. That is, go to the entity making clear the positive attitude and try to improve as far as possible the initial proposal.
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Tags: assess a loan, financial product, good credit history, personal loan