You probably heard about installment loans from a friend who recently used one to fund a home-improvement project or you remember your parents paying off installment loans when you were a kid. As such, you’re now interested in doing so.
The process of procuring such a loan is not terribly arduous, but you do want to keep some specific advice in mind to ensure a smooth and successful endeavor.
Set Your Goals
You should not take out a loan simply for the sake of having extra money in your bank account. The purpose of obtaining an installment loan is to use the money for a specific financial goal or endeavor.
Some possibilities including sudden necessary kitchen upgrades in your house, paying for repairs on your car, or covering unexpected costs of classes at the local college. If you do not have a specific plan in mind, put a halt on your installment-loan application.
Review Your Credit Score
In the US, credit score is everything if you want to be assessed on your credit. For example, you don’t want to encounter any shocking surprises when you’re trying to get approved for installment loans in Delaware, and reviewing your credit score can help to reduce this risk.
Your credit score is going to play a role in whether or not you get approved for the loan. A low score signals a risk to the lender. If you do get approved, you might have higher interest rates because of your low credit scores. However, some lenders don’t weigh your credit score as heavily, so you still may be able to be approved for a loan with poor credit. Be sure to check their requirements before applying for a loan.
Here in the Philippines, the Credit Information Corporation or CIC is spearheading our country’s credit scoring system.
Understand How Interest and Penalties Works
As a first-time loan applicant, you need to understand how the lender makes money out of loans. Each loan carries interest that you need to pay. Always choose the one with the lowest interest rate to save on interest expenses.
Review Fees and Penalties
Do keep in mind that the loan could come with other fees. For example, the loan may have an origination fee subtracted from it, or you might need to pay a fee to set up direct payments.
You should also thoroughly read the contract and pay particular attention for any information about penalties. These types of penalties can certainly exist if you do not make your payments on time. Some lending entities will also charge a penalty in the event that you make extra payments or decide to pay your loan off early.
Gather Your Materials
During the application process, you will need to provide financial information about yourself. This is part of the so-called KYC or Know Your Client.
Processes can vary by lender, so what you might want to do is to research the process of the lender that you are planning to use before you fill out the application. Some applications might simply ask you what your income level is and then request a bank statement of account to check for that amount of income.
Other applications may require you to scan paperwork that shows your income. In any case, gathering relevant materials, such as your bank account number and recent payslips, can help to expedite the process.
Choose Your Loan Wisely
Chances are that you will have a few options from which to choose once your application materials are submitted. For example, you may have a choice of different loan amounts to take and different repayment lengths. The best idea is to take the lowest amount of loan that you need.
Remember that you need to pay interest on all of the money that you borrow. As far as the amount of time that you take to repay the loan, you must assess what you can reasonably afford. You may save on interest by paying back the loan in a shorter amount of time, but you also may leave yourself with no money in your bank account for emergencies or other bills.
Choose Automatic Payments
The easiest way to ensure that you are making your payments on time is to choose an automatic debit arrangement. Typically, this type of plan means that your payment is automatically withdrawn from your bank account on its due date.
Of course, you must make certain that you have enough money in your account to cover the cost of the payment. Failure to do so could mean that you are charged fees or that you have an overdraw bank account. Automatic payments, however, help to prevent you from missing the due date and incurring other penalties.
Applying for an installment loan opens the door to opportunities in many ways. As a first-time candidate for these types of loans, make sure you follow some important advice.