When applying for a loan, it is important that you look at several aspects to ensure that you are making an informed and responsible decision.
There are things to consider and to look out for when applying for credit. It is, of course, a matter of ability to pay and then there are the factors that determine its characteristics and price.
1. The most important thing: knowing if we can pay a loan
What good is a credit we can’t pay, right? Let’s make a responsible and realistic budget to know how much we can allocate to your payment so as not to get into issues of non-payment that generate default interest and other penalties, plus an unattractive payment history in the Credit Report. To help you know your ability to pay, add your income minus your expenses (including the payment of your current credits), savings, investment, insurance and retirement contribution.
2. He who seeks, finds
Once you know your credit capacity, take the time to search for the best credit with the best characteristics and conditions.
3. Look at the credit interest
In a credit, a company lends you money or a service; The delivery of the resource has a price that is known as interest and is expressed as a percentage. Find out if the interest is fixed or variable. If the interest is fixed, you will have the certainty that the cost of the money you receive will not vary during the life of the credit. On the other hand, if the interest is variable, the cost of the credit can be modified up or down, according to the agreed conditions.
4. Other possible costs
A credit may have some other costs; for example, an annual fee, an opening commission, a fee for research costs, etc.
This point is important because there may be a low interest loan that has many fees and commissions that end up making it more expensive than a higher interest loan.
This means that to know exactly the full cost of a loan you need to add the interest plus the installments.
If you are going to search with several institutions for the best credit option for you, it can be difficult to ask about the interest, fees, commissions and other possible costs that each credit may have. That is why there is a tool that makes it easy to quickly know the cost of a credit, it is called CAT (Total Annual Cost) which is presented as a percentage, and consists of a calculation of the full cost of a credit in one year.
5. Time does have a price
See if the interest rate moves according to the term of the credit. Generally, when the term is shorter, the amount you must pay each month is greater, but the total amount that will be paid for the credit is less. When the financing term is longer, the amount that must be paid each month is less, but the total amount that will be paid for the credit is greater.
6. The hitch
And finally, the amount of down that you can put on the applicable credits (for example, on a car loan or a mortgage loan) also has an effect on the interest rate. The higher the down payment, the less money you will need to borrow and the interest rate may be lower as well.