Whether applying for a bank loan or mortgage, you can expect to find yourself up to your ears in paperwork these days. Lenders have tightened their restrictions in many sectors, which entail more hoops to jump through for a borrower. It’s tempting to just sign on the dotted line immediately when you’ve been approved for a loan, but this can cost you money down the road if you enter into a restrictive agreement with high interest rates. There are several details that you should be on the alert for when you are looking at a loan agreement. These can help you stay on top of any overly restrictive terms or hidden fees that the lender may sneak into the contract.
One of the fundamental aspects of any new loan that you’ll need to consider is the interest rate you will be expected to pay. This is known as the Annual Percentage Rate, or APR. Although a loan may be advertised at a certain percentage of interest, the amount you could actually pay on an annual basis may be higher due to fees. These should be included in the APR, which will show you the full amount you will be charged each year on your loan. Compare APR rates carefully when looking at different loan options.
It’s vital to take a closer look at the terms and conditions of a loan’s payment schedule. This information will include how many payments you will be expected to make over time, how frequently you will need to make them, and how much will be required in each payment period. You should be able to see a breakdown of how much of each payment is allotted to principal and how much will go to interest. Another number to take note of is the total payments, which is the complete amount of money that you can expect to pay over time if you make all of these scheduled payments. This can be an eye-opener because it will show you just how much you’re paying in interest and fees, which can be a staggering figure at times.
Administrative Charges and Fees
One of the most common mistakes that borrowers make is skimming their loan agreements quickly, glossing over any potential fees. These fees may be hidden, but they are always included in the fine print of a loan agreement. Look for a section that lists finance charges, which should include a list of these various administrative fees. Add this finance charge to the overall cost of the loan to get a better idea of what you will be paying the lender. It can be helpful to use the services of a financial advisor from firms like Lombard Odier to go over the fine print for you.
You may think that you’re borrowing a certain amount, but this could be different from the cash value that you’re actually offered by the lender. This is because there are usually up-front finance charges that will be taken out of the amount you’ve requested right away, leaving you with a different financed amount. Keep track of this in case you are expecting a specific cash loan value.
By taking the time to read through this fine print carefully and enlisting the services of a professional from financial firms likewhen necessary, you can find a loan that best suits your situation.