When it comes to securing a loan of any size, you should definitely be doing your homework on providers and shopping around like you would when researching any other product. Every loan provider is different, giving different levels of service and varying rates and features. So how do you know who to trust with your loan? Here are a few things you can look for when choosing a loan provider.
Look at the sorts of services any potential provider is offering. Some specialise in home loans or vehicle loans without crossing into other areas. Others get even more specialised by offering services like car loans for those stuck with bad credit. You should know right away if a provider is offering the kind of services you require. Do your research so you can nail down precisely what it is you need from them.
Interest rates can vary wildly from provider to provider. All of them claim low rates to get you in the door, but not all of them can actually back that up when you get down to business. You should obviously be searching for the lowest possible interest rate on any loan, but you should be checking out the fine print too. Does the rate change if you miss a payment? Are there any interest-free periods?
Commission rates only really come into play when you go through a finance broker, but it’s still important to know your way around how they work. Brokers work as an agent between you and the loan provider. They’re there to get you the best deal, which means they’ll charge a commission. To collect commission, they must, by law, have a signed finance broking agreement with you. They’re not actually entitled to a single cent of commission unless they land you the deal by following the precise terms outlined in that agreement, so hold them accountable.
What is the rate of approval of your prospective loan provider? If you have bad credit, find out about their policies on lending to people in your situation and, if approved, you’ll be charged a higher rate. Some providers are quite liberal with their approvals while others are maddeningly fussy. Neither is necessarily an indicator of trustworthiness, but it may give you an idea of what it will be like to deal with them down the track.
Many providers offer income protection insurance. This protects you and them against any unforeseen circumstances, like injury or sudden unemployment, that will prevent you from being able to make your repayments. Your provider can’t force you into taking out insurance through their own insurance arms, so be sure to shop around on that too for the best possible deal.
Prepping to take out any loan is a stressful task that requires a lot of careful consideration. It can be tempting to just take the first deal you get offered but this is rarely the best option. Doing your homework before applying for a loan could save you thousands in the long run, meaning you’ll be free from debt that much sooner.