subject: Taking Out A Loan - Questions You Should Be Asking [print this page] Taking Out A Loan - Questions You Should Be Asking
Nobody likes having to go to a bank or other money provider to borrow money: it can be scary and daunting, especially if you've never done it before and don't know the process. Read our handy guide for a few questions you should always ask before committing yourself to anything. It might sound obvious, but you should check exactly how much your loan is for as this will make sure you're on the same page as the loan provider and there won't be any confusion.
A vital question you need to ask before signing anything is: will the loan be secured or unsecured? There are key differences here. Secured loans are generally larger than unsecured ones. Unsecured loans are considered to be personal loans' and secured loans are usually secured against some property - generally your home. This means that if you fail to keep up with the repayments, the loan provider may be able to repossess your house for failing to comply with their terms.
Another key point to ask about is the interest rate you will be charged on the loan. You should ask how this is calculated as it can ultimately add a lot to your debt. Also ask if you will be charged a fixed rate of interest for the life of the loan or if the rate will vary depending on economic conditions. You should also ask what happens to the interest if you miss a payment as this often means you end up paying double as a penalty.
Another thing you should ask your loan provider for is a breakdown sheet of your monthly payments so you know whether or not you will be able to afford the loan. At the same time, get a breakdown of any additional fees they may charge you so you know your rights. Lots of loans have a set schedule of fixed payments but make sure to check as others vary from month to month. This can be a problem if you have a variable income.
The last thing you should ask is: how long will you have to pay back the loan? You need to know how long the repayment schedule lasts for and this is also a good opportunity to ask what happens if you need a break from paying back the money. Some loan providers offer repayment holidays. Also check to see if there are any fees associated with paying back the money early as loan providers often whack on an extra charge to make up their money.
