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Borrowers Beware: Things to Watch Out for When Choosing a Lender

Choosing a lender might be the first and biggest challenge you’ll have to face when shopping around for a loan. But being aware of these red flags can help narrow down your options and leave you with trusted lenders to choose from.

No credit check promises

Alternative lending has become very popular nowadays, mainly because of higher approval rates and faster loans. But there’s a reason why traditional lenders would want to check on your background and credit. Responsible lenders always want to ensure that you can afford to pay back what you aim to borrow and are able to hold your end of the bargain. While it’s not appropriate to advise that no credit check loans will only bring you harm, it’s vital to realise that they could cost a lot more than traditional loans.

Interest-only periods

While it could be tempting to pay less during interest-only periods, this is actually one of the simplest ways to waste money. Basically, since you’re only paying for interest, you’re not working on lowering the full loan balance.

Very long repayment terms

While a longer term means lower monthly payments for you, it’s just one of the traps many lenders use to get more money out of the deal, because there’s more time for the loan to accrue interest. Make sure that you sign up for a reasonable timeframe, just enough for you to recover and pay the loan back.

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Early repayment charges

In relation to the above, there are many lenders who would charge a fee should you decide not to push through with the whole duration of the loan and pay off the balance in full. It would be wise to check it out early on so you’ll be free to pay off the whole balance should you acquire the money.

You feel pressured

No matter how big or small the loan is, it’s a financial commitment that should be taken very seriously. It is your right to ask whatever it is that you need to know regarding the loan and its terms before you say yes. If anyone tries to rush you into signing a contract without explaining everything thoroughly, you should definitely walk away. A reputable and honest lender will always give you the opportunity to review everything and walk you through the ins and outs of the contract, especially if there are multiple options available.

You are urged to borrow more than you need

While it’s great to have extra money that you can tap into, a good lender will not urge you to bite off more than you can chew just so they can earn extra interest. Steer clear from lenders who pressure you into borrowing more than what you need, because it can end in you struggling with the repayments.

The website isn’t secure

This is a no-brainer. Should you apply for a loan online, make sure not to send personal and sensitive information through unencrypted servers. Always check out if the site’s SSL certificate is valid, because only then can you ensure that your information is transferred securely.

No fine print on the website

A reputable provider should always disclose the terms and conditions, privacy policy, and other legal matters on their website. This allows you to know what the lender is planning to do with the information that you provide, before you do it. If you cannot find those disclosures anywhere on the website, you may be unknowingly consenting to the sale of your personal information to third parties.

Full loan terms are not provided

Whenever you’re trying to secure a loan, the most important consideration is to assess if you’ll be able to pay it back. This is why it is important that the repayment terms and schedules are disclosed from the very beginning, which includes a breakdown of how interest is calculated and any other associated fees. A responsible lender should fully explain how much your loan is going to cost you in the long run.

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Top Tips For Finding the Best Loan Deal

Looking to borrow some cash but are worried about the consequences? Follow these top tips to make sure that you nab the best possible loan deal.

Have a healthy credit score

Before you run to any particular lender, the first thing you need to do is check on your own credit rating. As expected, the better your credit score is, the better your chances are to get accepted and to get a reasonable deal. Even if you haven’t started on one yet, take the time to research so you could have an idea how much the lender will most likely charge.

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Know all the fees

Many borrowers commit the mistake of looking solely at the loan’s interest rates. However, there could be many fees associated with the loan, such as processing fees, late fees, early repayment fees, etc. It’s important to be aware how much the loan could cost you should you be late or cannot afford to meet your scheduled repayment. Additionally, even if you originally haven’t planned on paying the loan back in full sooner, it would be wise if you can do so without any penalties should you have the needed cash to pay off the full balance.

Do not apply for too many loans

Whenever you apply for any type of loan or credit, the lender will have to pull out a copy of your credit report. Unfortunately, too many inquiries could be seen as a red flag, and providers tend to be hesitant on granting your application. You should space out your loan applications and aim to apply only when the chances of getting approved are high.

Borrow only what you need

Borrowing a smaller amount of loan could mean that you’d have to pay higher in interest rates as compared to when you borrowed a larger amount. Still, a smaller loan helps you to qualify more easily because the risk is lower. In addition, a smaller loan means you could finish off with your repayments sooner and the chances of default are much lower.

Be ready to bargain

Negotiating is a skill that you shouldn’t take for granted whenever you’re shopping for a loan. Even if you’re not the best haggler, it shouldn’t hurt to ask if there’s any way that you could pay less. And even if you don’t have the most impressive credit history, you shouldn’t simply accept the first option that was thrown at you.

Shop around

Whatever type of loan you are looking to get, it always pays to explore your options. Most often than not, the first deal you’ve found is not always the best. There are many comparison sites online that should give you a quote across different lenders so that you can find the most affordable rates without even leaving your home.

Read the fine print

There’s a reason those contracts consist of too many pages, sometimes printed in very small fonts. Many lenders want to make sure you miss out on those important terms and remain unaware of the traps. To avoid this, always take the time to check the small print, and, even better, bring someone to double check with you.

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