Money and credit - key questions to ask before borrowing
Taking out any sort of credit is a big financial commitment. However, there are ways that you can ensure that you have got a good deal at an affordable price. The following tips will help…
Compare the cost with other similar deals.
Look at the APRs and compare them. Normally, the lower the APR, the less you will pay. However, there may well be additional charges that you are unaware of that are not included in the APR. Make sure you know the full amount you are expected to pay.
Is the borrowing a secured loan?
This means that your home is being used as security. Therefore, if you don't keep up the repayments, you could lose your home
Is this the right deal for you? Could you get a better interest rate?
There are so many deals in the market place, it always makes sense to shop around. Using the internet to compare APRs and product features is the quickest and easiest way.
Read the credit agreement form and ensure that you understand it before signing
Most people sign a credit agreement at the till, not bothering to read the terms and conditions. You should always take the time to read through any credit agreement before signing it. Make sure you fully understand what your obligations are.
Never feel pressurised to sign an agreement. If you are not sure about it, take it away and get advice. It is a legal document, after all.
Will the interest rate stay the same?
Check whether the interest rate is fixed or will change as the latter will affect your monthly repayments.
Are there any extra charges you can expect?
If you pay a loan off early, the lenders may charge a fee, so you need to find this out before you sign up. And if you miss a payment, you will have to pay penalty fees.
What is the total amount that you will pay back?
Find out how much you will pay back in total. This will give you a true feel for how much you are being charged in interest.