Be Cautious of Low Rate Loans
At a glance, comparing loan rates seems simple. You make a few calls or have a meeting, find out who is offering the lowest rate, and then you’re done. Particularly if you’re looking to consolidate a bunch of different debts into a single loan payment. However, loans are complicated, and sometimes there’s more going on beneath the surface. So just because one loan looks like it has the lowest rate, doesn’t mean it’s the best choice for you. Be cautious of low-rate loans before you sign on the dotted line!
Low Loan Rates Aren’t Always Best
There are a lot of factors that go into a loan that will decide how much you end up paying over the life of the loan. The interest rate is the one most of us know. However, you need to ask if your loan has simple or compound interest on it. The former will always be the same, but the latter will change and fluctuate. That can be a problem if you start missing payments, and by the time you get back on your feet the loan is too heavy for you to carry.
Other factors, like early repayment fees, and whether or not a loan requires collateral, can also make a big difference. You need to consider these things before making a decision. In many cases, loans will require you to have a certain credit score. If you don’t, a lender simply won’t extend you the loan at all. Or if they do, it will not be on the terms someone with a better score would receive.
At the end of the day, though, you need to break out the calculator and pencil to see which loan is going to be the best for you. Because having a smaller interest rate looks good, but once you do the math it’s possible that the loan could cost you more in the long run.
For more information on low rate loans, contact Mid America Debt Relief. Let us help you weigh your options and set yourself up for financial success. Contact us today for your free 55-minute debt consultation.