Sooner or later, even if you are a person who hates debts and do everything possible not to have any, it is likely to need to hire at some point in your life a loan.
A car breakdown at a bad time with a vacation that had left more expensive than expected and an overall increase in spending had to be done in a delicate economic situation for the coming months.
What should look out for when you borrow?
We will see a number of golden rules you should follow if you want a loan that really helps and does not become a detriment to you.
Throughout this article we will see the following:
The main characteristics presented a loan.
The points you have to consider before applying for a loan.
The keys to hire the best loan for your needs.
Some tips to lower the cost of borrowing.
Basics of a loan
Before getting thoroughly with tips and guidelines for choosing the best loan is worth knowing the different elements that make a personal loan. And knowing how it works will be easier to know that you look for when hiring one.
The amount: The amount that the bank puts at your disposal. The minimum amount of personal loans is about 3,000 euros although there is no legal limit. Depending on the amount requested and the interest rate will be. In all cases a greater amount, the more interest you will pay.
The interest rate: Indicates what to pay the bank for lending money. Personal loans are contracted at a fixed rate, unlike mortgages. The types of variable rate loans tend to spend longer and fixed rates for short term loans.
The time: The time during which the loan will be paid. They may be months or years. As a rule the minimum term is 6 months and maximum of 10 years. Keep in mind that a longer period plus interest will be paid.
Commissions: The commissions can file a personal loan are:
Evaluation fee: You pay in respect of analysis and study of the loan to see if you are granted or not.
Arrangement fee: is paid at the time of entering into the transaction and is a percentage of the amount borrowed.
Commission for changing conditions or against collateral: You pay when you make a change in the initial conditions already agreed.
Commission for early partial redemption: You only pay if a partial loan repayment occurs. It is a percentage of the amount redeemed.
Early termination fee: Like the previous commission, is paid if the early repayment of the loan is made and is a percentage of the amount remaining to be amortized.
Typically, these committees discussed as the last item, according to the guide on personal and consumer loans the Bank of Spain, have a maximum percentage that can not be overcome. For example the early cancellation fee may not exceed 3% for fixed-rate loans or 1.5% on variable rate loans.
Basics before hiring a loan
As important as knowing borrow and what to look is knowing when to ask for them. Sometimes the solution to apply for a personal loan is the simplest but not the right one. I explain some keys to keep in mind:
Do you really need ?: Are you going through a difficult economic time and really the only solution is to borrow from a financial institution? Are there other solutions? I ask a family member or friend? Looking for extra income?
Can you deal with the payments on a loan ?: Be absolutely certain before applying for a loan you can return it. Studying in detail your employment status and monthly fixed expenses you have. In the latter the free tool that offers Ahorro.NET can help enormously. If you have any doubt it is better not to apply for the loan.
The keys to hire a loan
If after the above it has clear that it is best to apply for a loan you should follow these guidelines to hire the best possible loan:
1. What do you want?
It is essential before you start looking for a loan that you are clear about the type of loan you need. It is to buy a car? To make a vacation? To perform a master? Depending on their purpose greatly change the interest rate, the amount of money you can request or the maximum term of repayment.
2. Study the market for personal loans to fund
Do not stay with the first option you see. On the internet there are numerous financial comparators, as Bankimia or Helpmycash, showing you personal loans that are being marketed now in the market and that can facilitate you finding the loan that best suits your circumstances.
3. Do not apply an amount that exceeds 35% of your monthly income
Remember that the sum of the quotas of all your debts (mortgage, loans, credit cards) should not in any case exceed 35% of your net monthly income.
That is, do not order more than you can pay per month. Flexible quotas that are able to return without much effort. It is always best to apply a smaller amount you can afford without numbers.
4. First, go to the bank where you already have contracted other products
In most cases, the entities with which you work and it’s easier than you offer better conditions to recruit financing products.
5. It is important that you take notice carefully in the interest rate
This marks what you’ll pay at the end for the loan. The lower the better, of course, but be careful that a low interest rate not go together with generous commissions.
Personal loans have an interest rate of between 8% and 12%. There are types of loans for very specific purposes with lower interest rates, such as student loans can have interest rates of 6%.
6. Look closely at the commissions that are the point normally expensive loans
Commissions should avoid are the study commission, the fee, the partial redemption commission and the commission for early cancellation.
Study and openness are very similar because they come at the beginning of the loan simply to formalize. Therefore, it is easy that at least one of those committees not charge you.
If you plan to make partial repayments of the loan, that is, you pay the loan in full before completion, it is important to try to reduce or eliminate fees for partial repayment and prepayment.
7. Read the contract carefully personal loan
With focus on those points you do not understand and have you clarify them before signing. Beware the trap deals. At this point, it pays attention to default interest if you can not deal with any quotas or repay the loan in the stipulated time.
8. During the first 14 days you can cancel the loan without cost
Do not forget that by Law 16/2011, of June 24, you have 14 days during which you can lie back on hiring credit. Without explanation, either because you have solved the liquidity issue for you solicitabas credit or because there at some dubious contract clause. Cancel the credit during the first two weeks does not have any cost for you
How to reduce the cost of borrowing
To reduce the costs of a loan there are two fundamental ways:
Payment guarantees: The higher your creditworthiness easier the bank will grant you the loan at a lower interest rate or better terms. This aspect can be increased through ownership or other property or through a guarantor.
Relationship with the entity: Generally, the more financial products have a certain entity be better loan terms. Household payroll, hiring credit or debit card, home insurance or investment products can help improve the quality of the loan.
You can improve both aspects, that is, payment guarantees and bonding with the company, hiring a payment protection insurance.
Before the insurance payment protection must be studied thoroughly if the extra costs associated with the insurance compensate hiring but in certain cases it may be a good choice.
We hope we have clarified many of the questions you might have if you are thinking of applying for a loan and help you hire the best loan to suit your personal needs and circumstances.