What You Need to Know Before Taking Out a Loan

Taking out a loan may seem like an easy way to get the money you need, but loans come with their own set of risks, so it’s important to be informed before signing on the dotted line. When you take out a loan, you’re essentially entering into an agreement with another party (usually a bank or other financial institution) to borrow money in exchange for agreeing to pay it back at some point in the future.

Interest Rates
The interest rate is what you pay in order to borrow money. Interest rates are typically listed as Annual Percentage Rates (APR) which will appear in small print on any loan documents. The higher your credit score and the more disposable income you have, the lower your interest rate will be. If you don’t have good credit and no income, it can be difficult to find a lender willing to lend money at an affordable rate. Make sure you understand your interest rate before signing on any dotted lines!

Repayment Schedules
There are many repayment schedules you can follow when paying back your loan. However, you need to make sure that what you agree upon is realistic for your financial situation and income. If you have any questions about your payback schedule or making payments, please consult with your lender!

Credit Scores
Do you have good credit? If you’re like most Americans, your answer is probably I don’t know. It may seem like a daunting task to check up on your own credit report and score, but learning about how credit works and what your number is can help you identify—and possibly fix—any mistakes or problems that could potentially damage your financial future.

Other Important Considerations
No one wants to get into financial trouble, but it’s possible if you don’t plan ahead. Every loan comes with interest rates that determine how much you’ll pay back, in addition to monthly payments for how long you borrow money. As such, it’s crucial that you know what you’re getting yourself into before taking out a loan.

Qualifying For a Loan
Just because you need some extra cash doesn’t mean you should jump at any loan offer that comes your way. If you don’t have an established credit history or income, chances are high that your loan will be denied. Take a moment to read over your application and request clarification if anything is unclear. The more information you give them upfront, the more likely they will approve your loan.