The decision to take a loan should be big and important decision. Borrowing can significantly reduce financial flexibility and complicate making of certain life decisions. The issue of job security, for example, becomes much more important when a loan must be repaid every month. So think carefully before you decide to get a loan and make sure that the aim of taking the loan is according to your plans and financial objectives.
Do not expect that your bank officer can help you to determine whether you make a good decision or whether it is the best loan that you can find on the market. The bank earns on lending, and wants you to take the loan. The fact that you are eligible for a loan does not mean that taking financial loans is the best solution. It’s always good to appraise the possibility of the purchases, if you can save money for it do not take a loan.
If your credit is still required, select the most favorable
When you decide to take a loan it is very important that you find most convenient one. Ask yourself the following questions when you are choosing a loan:
Do you find a loan with the lowest interest rate?
Choose the loan with the lowest interest rate. It will make a big difference in the amount that you will have to repay. Keep in mind that the effect is bigger if the repayment period of the loan is longer. Try to negotiate with the bank about reducing the interest rate that is offered, especially if it is a larger amount of the loan.
Whether you prefer a loan with a fixed or variable interest rate?
Fixed rate means that your payment will be the same throughout the repayment period. Variable (variable) interest rate means that the bank has the right to change interest rate in accordance with the terms of the business or market changes. This means that your rate can increase, but also may be reduced. It all depends on movements in interest rates during the loan repayment.
If you are growing, you better take a loan with a fixed interest rate. However, keep in mind that the bank can faster increase interest rates if conditions are changeable, rather than reduce them.
Regarding that almost all loans with longer repayment period include a variable interest rate. It is important to understand the terms of the contract of the loan as well as the effect of changes in interest rates on the amount of installments and repayment ability of the loan. You must pay a lot of attention to the loan agreement and determine whether the conditions under which interest rates may be changed are clear and precise. The arrangements for specifying conditions of the loan have recently significantly tightened precisely to put an end to the bad business practices of banks and protect the interests of borrowers.
Finally, we should bear in mind the reputation and business practices of specific banks related to changes in interest rates, some banks have been better to their clients than others.