What Loan Questions to Ask Lender?
There are many reasons as to why one might take loans. It could be to refinance an existing loan or even buy products that one would not be able to buy otherwise. However, before one takes a loan it is better to ask some important loan questions – these can be posed to the bank as well. The answers to these questions will help you determine the kind of loan that will be good for one and will suit one’s financial condition to the t. Quite often it is seen that people are not careful before they take a loan and only end up repenting it later on.
1) What is my Credit Score?
This is a very important factor to be taken in consideration before taking a loan or even applying for one. This will play a major role in whether you get the loan or not, and also the terms and conditions of repaying the same. Your expenses in the long term will also be dependent on your credit score to a significant extent. In case you have a low credit score you are always better off trying to improve it before you apply for a loan. You can do this by paying off the small debts and also correcting any mistakes in your credit report. If you make your payments on time it will be of great help as well.
2) Secured loan or not?
Before you take a loan you should always be sure regarding the nature of the loan – is it a secured loan or a non-secured loan? A secured loan is one where the collateral is needed. You need to put up something against the loan. For example, if it is a car loan or a house loan your car or house is the collateral. This means that if you are unable to pay the loan back the bank can take the asset away. Secured credit cards can also be called secured loans since in these cases there is a credit limit and you can only loan as much as you have in your account. The majority of the personal loans are not secured. Read more about “Difference Between Secured and Unsecured Loans“.
3) How’s the Process of Loan Application?
This is a rather important question as you need to know the amount of time it would be needed in order for the lender to approve the loan. You also need to be aware of the factors that will help you get approved for the loan. You should also know how much time the bank will take before it provides you the money you are looking for. In the case of emergency loans, this is an important criterion. iCredit will process your application within an hour and you will receive the loan. Talk to us for loan inquiries.
4) How do I land the loan?
You need to know what you have to do in order to be able to procure the loan. In certain cases, basic information such as income statement and credit scores is enough. However, in some cases, you may have to get copies of your bank statement or tax returns. This will prove the number of assets at your disposal and the amount of money you are making every month.
5) How much is the Application Fee?
In order to start the loan or apply for the loan, you may have to pay a fee. It is always better to know how much it is going to cost in this regard. With a proper comparison of various fees, you would be in a better position to determine which one is economically more viable for you. This also helps when you make the said payment. Currently, our application fee is at $100.
6) What is the Rate of interest on Loan?
The interest rate is normally expressed by way of APR or annual percentage rate. However, this may not always be the case. With the help of the APR, you will have a clear idea as to what your expenses are going to be, by way of paying your loan back. If your rate of interest is higher it means your payments will be bigger. Student loans and mortgage loans normally have rather high rates of interest – in the range of 4-6%. In case of loans taken on credit cards, the rate of repayment could go up to 10% or even more. At times, it might even be as high as 27%. Personal loans normally fall somewhere in between the aforementioned loans. However, a lot depends on your credit score. iCredit does not look much into your credit score and we provide 4% monthly interest rate for all our clients from 1st Oct 2015.
7) What is the Period of Repayment?
This is the time that you get to pay the loan back. In case your repayment period is on the shorter side your payments will be on the higher. This is because you are getting lesser time to pay the loan back. In case the period of repayment is longer the monthly payments are lower as well. In this instance, you are getting a longer period for paying the loan back and the bank can afford to lower down the rates of interest. However, from an overall perspective, in case of a longer repayment period you are paying more than you would in a short period.
8) How much is the Pre-Payment Penalty?
In certain situations, you may receive extra money from somewhere or you may be able to save some money from your monthly expenses. In such situations, you might want to pay off your loan earlier than usual. In some cases, lenders may penalize you for this. So, when you are taking the loan you should always find out if the loan carries any pre-payment penalty or not. That way, later on, you will not incur any undue financial loss.
9) Any Limitations on using Loaned Money?
In some loans, you may have to use the money you have loaned only for a definite purpose. Examples of such loans are student loans, car loans, and mortgages. However, in the case of personal loans, you have the freedom of using the money exactly the way you want to. It is still better to ask before taking the loan to make sure if there is any restriction on using the loaned money.
10) What is the Default?
In certain cases, it might so happen that you are not able to pay the loan installments or you may end up paying later than you are supposed to. So, you should always be aware of the fines and penalties that you may have to pay in such situations.
11) What is the Amount Needed to Set Aside?
This is something that one needs to be absolutely clear before taking the loan. In the case of businesses, this question can be answered by coming up with a projection of the monthly cash flow of the company. This will include areas such as time taken by customers to make their payments and the time in which they themselves have to make their payments. It always makes a poor impression on the lender if the borrower does not know how much money he or she needs.
12) What Documentations are Needed to Apply for Loan?
It is common to see that a lot of loan applications never go far. This is not because of won’t of qualification on part of the lender but because of problems related to documents provided by him or her or not provided by him or her. The situation gets even trickier in case of business loans or loans applied for by business entities. The paperwork involved is much more than what would happen in case of individual borrowers. It is always advisable to be fully prepared.
13) Any Loan Repayment in Case of Death?
These are things that one needs to be prepared for as it affects the near and dear ones. The majority of people think that in case they die before the loan is paid back there is nothing that the bank can do. However, that is farthest from the truth. The banks always find a way to get back what is due to them. They can encroach on one’s savings. In case it is a secured loan they can jolly well take the asset away if they feel that is the best option.
14) Any Comparison with other Loans?
We can always go for personal loans instead of purpose-based loans such as car loans and mortgages. However, the question that we need to ask ourselves is will these loans cost more than the personal loans. The answer is no. More often than not, the specialized loans have lower rates of interest and they also provide more benefits than their personal cousins. In certain cases, where you already have taken a loan from a particular bank, if you apply for a specialized loan from them then you may get the interest waived off on it.
15) Did you Over-Leverage with Respect to Other Loans
You should never take another loan if you have already taken a personal loan in the space of three months. Normally personal loans dampen one’s chances of getting another loan. In certain cases, it might so happen that you may have to take a specialized loan but you need to make the down payment as well, which will not be covered by the said loan. In that case, you make the down payment with a personal loan and then apply for the specialized loan. However, the lender calculates your debt servicing ratio and finds it to be unacceptable. As such, the second application gets canceled. Read “Using Credit Card to pay for any Loans is Suicidal!“
