Choosing The Right Loan: 5 Factors That Should Guide Your Application


What do borrowers seek, when they search for the terms and conditions when applying for a loan?

Simple. They want to know whether borrowing a particular loan type would actually make sense or not. People borrow loan for many reasons. Some might need it to overcome a momentary financial crisis, while some might need to cover the repair cost. Different financial needs call for different loan applications. If you are looking for a short term loan to pay off your bills, then a title loan actually makes more sense than bank loans with lengthy loan term periods. On the other hand, if you are looking for a mortgage loan, then applying for a title loan does not help.

Hence, always consider your present situation carefully when you decide to get a loan. This will give you an idea as what you should be looking for when applying for a loan.

How Do You Know Whether A Loan Will Make Sense Or Not?

The following points will show what you should be asking yourself when borrowing a loan –

#1- Why Do You Need a Loan?

As mentioned above, the nature of one’s need can tell a lot about the type of loan the borrower should get. Not all cases are the same and there are instances when your expenditure might turn out to be higher than your actual source of income. One such example is repairing car breaks. This can turn out to be very expensive, causing you to exhaust all your bank balance. Again, you might need additional cash this Christmas but you want to save and not reach your savings account to draw more money. In such cases, borrowing money from your friends or reaching to a title loan lender sounds more applicable.

There are other reasons for which a person can borrow a loan. But the most important factor to begin with, is understanding the importance of your need to get a loan.

#2 -Are the Loan Terms Reasonable?

When choosing a loan, how would you weigh the reasonability of your loan type?

Look into the terms and conditions and you will find your answer. Different loan lenders have different terms and conditions to offer. If the primary factors like the interest rate, the monthly payments and the average time period seem reasonable, then you can go for that type of loan. For example, applying for a bank loan to repair your car breaks does not appear to be reasonable when you can cover that cost with a title loan instead. Bank loan terms can be intermediate and long term. The time period here can vary from as short as three years to as long as 20 years. Undoubtedly, using a bank loan to repair your car breaks sounds unreasonable.

#3 - Will You Qualify for the Loan?

This is another factor that both the parties (the applicant and the lender) wants to know during the time of loan application. For a borrower, it’s a matter of priority. Someone in serious need of financial aid could also be suffering from a bad credit history and might not qualify if they apply for traditional loans. It does not make sense applying for a loan that you are not going to get. Look into the loan qualification criteria to check out what are the conditions for the approval of a loan. There are other kinds of loans such as the Title loan, where the credit score is not the determining factor for a loan approval. If you do not have the necessary requirements to qualify for a traditional loan, then you can look for other options with better offers.

#4-How Long Will It Take To Get The Loan?

People who are in pressing need of cash and have no trouble qualifying for a loan will be asking this first. Sometimes a loan application makes sense when you know you are going to get it when you actually need it. Time is an important factor. If a person has medical reasons that need immediate addressal, then a bank loan that comes with a lengthy process and a lot of paper work does not make sense.

#5-Will You Be Able To Pay The Loan Back on Time?

This is the reason why you must consider the rate of interest and the loan term before you click on the apply button.

Keeping such factors in your knowledge can help you come up with a strategy that can pay off your debts quickly. If you calculate your debt amount from before, you can make the necessary arrangements to cover them. It can be getting hold of a part time job or maybe changing your lifestyle completely. Nothing is impossible and you can witness a miracle if only you know the trick - pay attention to the minutest detail from the very beginning and make your plans accordingly. Think you can’t pay off $147,106 in debt? Think again.

How To Conclude a Loan Application?

The answer to this is taking note of the points mentioned above and preparing for it. Only then can borrowing a loan make sense. Are you ready for the loan? Do you have sufficient fund to pay back the loan that you are going to borrow? If not, then work it out. Personal loan or student loan, it’s the same for any loan type that you apply for. Be aware of the factors and anticipate the implications whenever you borrow a loan.


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