There are many options of consumer loans in the market today. Different banks and financial institutions have different loans with different benefits and features. These benefits and features are tailored to the varied needs of their different customers.
Due to the proliferation of these financial products, it can be an onerous task for customers to get the best consumer loans for them. In this article, we will discuss how consumers can get the best consumer loan of the day. We will discuss the features, benefits, and everything that has to do with these types of loans. We will also help you know how to choose the best one for you but before that let’s briefly discuss the different types of consumer loans.
Different Types of Consumer Loans
A consumer loan is a credit facility that is extended to consumers to meet different needs. These credit facilities come in different forms and have different features and benefits. They can either be secured or unsecured; the secured ones are those that are backed by collateral while the unsecured ones are those that are not backed by collateral.
They include the following:-
Mortgage
Most often, a home costs more than many people make annually. That is the reason why many will seek financial help to buy one. Banks and other financial institutions offer credit facilities for this purpose and that’s what is known as mortgage.
This can be said to be the type of loan with the longest repayment duration. Most mortgages last as long as 30 years while the minimum duration is 15 years. The repayment is on a monthly basis throughout the number of years in the agreement.
This kind of credit is a secured one because the house/property bought is used as collateral for the credit. This stands as security in case the borrower defaults on repayment.
You can read this article for more information about mortgages.
Students’ Loans
This is a credit advance given to help consumers facilitate their education at the tertiary level. This credit can be taken by either the student themselves or their parents or guardians. It is an unsecured credit because there is no collateral backing it. The repayment duration kicks in only after the student has graduated and started earning an income.
Car Loan
All consumer loans are actually self-explanatory. This type as the name implies is meant for the purchase of an automobile and the repayment period is between 2 to 7 years. It is secured because the automobile purchased is often used as collateral. It can be repossessed if the borrower defaults on payment.
The repayment period is usually shorter than a mortgage and the percentage of down payment required is usually higher. This is because a car is a depreciating asset.
Personal Loans
This is the type of credit advance that’s taken by an individual to facilitate day-to-day expenditure. This is the most flexible and non-restrictive type of credit that consumers take because it allows them to do whatsoever they wish with the funds.
The terms and conditions of this loan differ from lender to lender but the basic thing is that it is unsecured. Additionally, the amount usually approved for this kind of loan is not typically as high as other types.
Credit Card
This is a revolving line of credit in which a card is issued to a customer. With this card, the customer can make purchases and pay for services up to a pre-agreed limit. At the end of an agreed-upon time frame (most often monthly) the customer has to pay back the amount spent.
The interest rate on this type of loan is usually higher than other types of credit facilities. And defaulting comes with stiff penalties.
Refinance Loans
This is a credit advance given to help borrowers get out of debt. Most often some people default on any of the loans that we have discussed above. When this happens, the most common way of getting out of accumulated debts is to borrow a lump sum and pay off all existing loans.
Factors to Consider to Get the Best Consumer Loan
Much as a loan can be a lifesaver, it can also lead one down the road of financial bondage. In order to enjoy only the best of this financial product, there are factors to consider and things to be done before committing to any financial agreement.
You shouldn’t just take out a loan because it was easy to access you need to consider the following factors:-
Purpose of the Loan
Before you set out to apply for any kind of consumer credit, you need to define the purpose. Do you want to renovate your home or go on a vacation? Is it medical bills that you need to tackle or do you want to sponsor your tertiary education?
The purpose is what will determine the type of credit facility that you should go for. Note that these facilities all have different terms and conditions. So you may end up doing yourself a disservice if you take out just any loan. For example, the interest rate on a personal loan is not the same as that of a student loan and the terms and conditions are also not the same.
So be specific with the purpose so that you can match your application accordingly.
Interest Rates
This is the amount that a borrower will pay in addition to the original amount that they borrowed. It is usually a percentage of the original amount borrowed and it is what determines how costly or cheap loans are at the end of the day.
There are different types of interest rates which include nominal, effective, and real interest rates. You need to understand what all these terms mean in relation to the particular credit facility you are considering.
Find out the interest rate on the loan from different lenders and compare them to know which one works best for you. Bear in mind that some loans with lower monthly payments may lead to more interest paid out over the lifetime of the loan; however, there may be some that wouldn’t. So let’s find out what exactly the total cost of the credit will be at the end of the day.
Repayment Terms
This mostly has to do with how long you have to repay the loan. As we mentioned above, when you get longer repayment terms, you get to make lower monthly payments but you could pay out more interest in the long run. Conversely, a higher monthly payment is what you get in a shorter repayment period but with a lower interest rate in the long run.
We cannot categorically say that one condition for repayment is better than the other. All you need to do is know your financial situation and which payment term will work best for you.
Additional Fees and Charges
Find out all the fees that you have to pay before and after you get the loan and also during the repayment period. Some of these fees include application fees, origination fees, and prepayment penalties.
Some lenders will not divulge all the fees that come with the loan until after you have signed the dotted line. Sometimes or even most often, these fees are written in fine print which many people find quite tedious to read. It is therefore very important that you read the fine print to know all the fees and charges that come with the loan or will accrue throughout the duration.
Credit Score
You need to know your credit score before you embark on applying for a credit facility. This will help prepare you for the terms and conditions that you will qualify for. Know that your credit score determines whether your interest rate will be high or low. The higher your credit score, the higher your likelihood to get better rates and terms.
If your credit score is low, you might want to work on it before you apply for a loan. You can also apply with a co-signer whose credit score is ok. This will give you the leverage to get better rates and terms.
Customer Service
This may look like an unrelated point but it is a very important one. The customer service of the lender should be excellent; they should be able and willing to answer your questions no matter how ‘dumb’. Do not go with any lender that shows you a type of attitude that says they are doing you a favor.
Look out for those who are customer-centric and ready to support and ease the concerns of their customers. Those are the lenders that will make the whole journey less stressful for you and would even help you out in the event that you encounter the unexpected during your loan term. You can check out this site for more information on how to get the best consumer loan on the day- https://www.forbrukslån.no/beste-lån. Remember that having the right information can help you get the best offers.
Conclusion
Getting the best loan for you requires that you take out time to do some research. Do not be in a hurry to sign any document; compare different offers till you find the one that works best for you.
We have shared some basics in this article and we believe that this is a good start for your research. The information shared here will help you know what to look out for to get the best credit facility for you.