TIPS ON TAKING CONTROL OF YOUR FINANCIAL LIFE

What to Know When You Need a Loan

You’ve decided you need some extra money and need a loan.  You may or may not have good credit.  Here are some tips on what you need to know to get that extra money in the best way to protect you and your financial health.

Know What You’re Borrowing

Every lender is going to charge you for providing a loan.  This means that you will have to cover the principal amount (however much you need to buy whatever it is you need) plus whatever interest your lender is charging for the service and possible administrative fees.  Shop around to find lenders who charge no upfront fees, small administrative fees, and reasonable interest charges for the life of the loan.

Know the Terms of Your Borrowing

Every reputable lender puts all terms of the loan and payments in writing and requires your approval before any action is taken.  You should see costs and how they are determined, a proper payment schedule, adherence to Truth in Lending practices, actions to be taken in case of default, prepayment policy, and privacy policy.

Know From Whom You’re Borrowing

Use a reputable company that has a good and longstanding reputation with its customers.  This is easy to check through federal and local agencies such as the Better Business Bureau in the loan company’s area, Office of Consumer Credit Commissioner and the Department of Federal Trade Commission’s Consumer Protection Agency.

Never go with a company that claims they can guarantee a loan for a fee paid in advance.  Also avoid payday lenders who charge too high an interest rate and require that you pay back the loan in too short a time to be reasonable in many cases.

For a small consumer loan, consider your credit union or a company that specializes in small loans. Military personnel have access to both kinds of institutions that are designed to suit their needs. 

Knowing When You Have to Pay it Back

Be sure you understand when you will be repaying the total charges for the loan.  A monthly payment schedule is often the best method.  Be clear on how many months it will take you to pay back the loan.

Know If You Can Pay It Back

Do the math.  Add all sources of income for a month.  Total all monthly living expenses.  Divide your other expenses that you will incur over a year’s period, such as your savings requirements and insurance payments, by twelve and add that number to your monthly expense amount.  Look for a loan where the monthly payments still leave you a positive balance after you’ve subtracted all your expenditures from your monthly income.

Know How You Will Pay It Back

Make certain you know what you have to do to make your payments.  Do you have to write and mail a check?  If so, be certain that you are going to receive preprinted payment coupons with preprinted envelopes noting the correct address.  (Often loan companies have processing divisions located at a different address from the administrative offices you deal with when applying for a loan.) Do you have an allotment or automatic deduction of your monthly payment from your bank account?  Be clear on how that will work, what extra costs if any would apply, and when the money will be transferred out of your account.

Know What Will Happen If You Have a Late Payment or
Want to Prepay

When you apply for a loan, you might have done the math but you can’t predict the future.  Your loan company should make it very clear what happens if you cannot meet your monthly payments on the loan.  Conversely, you might find extra cash that lets you repay the loan before the agreed-upon period.  Check that the loan company will accept prepayment without penalties.