It’s a difficult thing to swallow: you’re in a jam, and it’s time to take out a loan.
Maybe you just need a little bit of money to make ends meet this month. Maybe you’re financing a major investment – like a car or a home – or, looking for funding to start your business.
Whatever your situation, you have to give your first loan its due diligence. Dealing with a loan company is not necessarily common sense, and failing to do your research can leave you in an even worse scenario than you already are.
To clear any confusion and save yourself trouble down the line, ask the following ten questions before taking out a loan.
1. What Kind of Loan Options Do You Offer?
For some people, it’s best to take out a big loan and commit to paying it off over a long period of time. Others, though, just need a bit of a cushion, like a small payday loan or same-day loan.
These are two extremely different loaning options. Not to mention, there are many more financial solutions available out there. Do your research and inquire about all your opportunities before deciding which loan to apply for.
2. Are You Going to Check My Credit?
Maybe you do need that big loan, but you only qualify for a smaller one right now. That is often the case if you have a poor credit score.
Sometimes, though, a loan company won’t even check your credit!
Don’t expect this if you’re trying to get a small business loan or a homeowner’s loan. But, if you’re looking to obtain some quick cash, you may be able to show you’re good for it without having to refer to your credit score.
3. Do I Need a Cosigner?
One way to give a loan company a sign of good faith is to have a cosigner. This is the person who will become responsible for the remainder of your loan should you end up not being able to pay it off.
They’re basically insurance for lenders. From the loan companies’ standpoint, a cosigner means they’re going to get their money back either way. Whether the payments come from you or your cosigner doesn’t really matter to them, as long as the money comes in.
Ideally, the money will come from you. In the event of a big loan or some other associated risk, most companies will ask for a cosigner, just to be safe.
4. Can You Explain My Payment Schedule?
Speaking of payments, don’t forget to talk about the payment schedule. Start by clarifying when your first payment is due. Missing your first payment will mess up your schedule right away.
Also, clarify whether payments recur on a certain day of the month, or if they’re due after a certain time frame. Such details help you plan out future payments, and maybe even get a little ahead on the money you owe.
The more you can put towards this debt – even if its more than what is asked monthly – the better.
5. What If I Miss a Payment?
If you’re not getting ahead on payments, at least make sure you don’t fall behind. A loan company won’t go to your cosigner right away. They may add a late payment fee or jack up your interest instead.
This will all be laid out in your contract. But it’s best to clarify such details while consulting with a loan company before you commit to a loan. The penalties of one option versus another may be what helps you make your final decision.
6. What’s the Interest on My Loan?
Not all interest is the same. Interest could depend on the size of your loan, the reliability of your lending history, and more. It may even be a unique rate, based off a combination of various factors.
Whatever your interest is, be aware of it before you sign. This helps you understand what the final price tag of your loan will be since interest adds to the overall value of what you pay back.
While you’re discussing interest, ask how payments are broken down. Sometimes, you can apply payments directly to the premium, which tends to be better than just paying interest all the time.
7. What’s Your Typical Client Like?
In addition to the hard facts and the various options of your loan, make it a point to bring up further details about a certain loan company. Ask about their average kind of client.
This helps you understand the services provided in full. Many lenders will specialize in small business loans, large funding opportunities, or supporting day to day needs of their consumers.
This question has nothing to do with your bank account. Rather, it shifts the focus from how much money you can anticipate receiving to the kind of service you can expect.
8. Can You Tell Me About Your Reviews and Satisfaction Ratings?
To really find out a thing or two about quality service, look for quality reviews. You can bring this up to a loan company representative directly, or look for client testimonials online.
The one thing you shouldn’t do is ask for specific client names or situations. After all, there is a certain level of lender/borrower privacy. But, the information that can be shared should be enough to tell you how comfortable you can feel with your lender of choice.
9. What If I Need to Borrow More Money?
Perhaps you get more comfortable with a lender than you originally thought you would, to the point that you consider borrowing more money. Be careful of getting yourself into more debt than you started with.
But, if you have a legitimate reason to expand your loan, or get another one entirely, this is a matter that’s best to sort out sooner rather than later.
10. Who Is My Point of Contact Moving Forward?
Last but not least, always clarify who your point of contact is.
The same person who files your loan application may not necessarily be your go-to person with future questions about your loan. Some loan companies separate sales and customer service, while others train each member of their team to do it all.
Make sure you know which kind of teamwork you’re working with.
Meet Little Loans: The Ideal Loan Company for You
Ready to take your bank account from almost zero to something more manageable? That’s where we come in. Little Loans offers lending solutions for all kinds of financial needs.
But, our main priority is finding the service that works best for you. We take an individualized, thoughtful approach to lending, which you’ll realize while discussing the questions mentioned above, or any other concerns you may have.
To get in contact and get your lending process started, click here.