When you are strapped for cash, getting a short-term loan is what most people can think about. Unlike in the past where you had to make a trip to the bank and apply for a loan, now you can get a quick short-term loan at the comfort of your home.
However, it’s important that you make an informed choice to ensure that you are getting the most suitable online loan. Doing this requires that you have a clear understanding of various aspects of the loans as well as the lenders. In this article, you’ll learn some actionable tips to help you get the best loan.
Consider your intended use for the loan to know exactly how much you need to borrow
There are multiple reasons for taking loans but the reason behind the borrowing could influence the available choices. There are some lenders who are not concerned with how you spend the money but there are others who limit where the money can be spent.
After knowing how the money is going to be used, you can now settle on an amount that is sufficient to cover the expenses as well as any upfront fees for the short term loan. If you are using the short-term loan to take care of a major expense, then it’s important you create a budget and capture every expense.
Basically, almost every lender has the minimum loan as well as the maximum amount available for their clients to borrow. When you know how much you need, it’s easy to choose the most appropriate lender.
Take a look at your financial situation and determine the monthly payments you can comfortably pay
If you are not confident in your financial situation, it’s likely that you won’t be comfortable with the payments. Generally, there is no point in taking loan whose monthly payments will stretch your finances and make life unbearable.
Before you settle for a short-term loan, it’s important to know if you can manage to pay the monthly payments and at the same time pay all your bills. This calls choosing a loan with favorable terms that are largely determined by the following factors.
- The repayment period and this is usually in months
- The amount borrowed
- The interest rates charged
To be on the safe side, choose a monthly payment amount that allows you to have some extra cash to take care of other financial obligations. If you are patient in your search, you’ll find multiple lenders who can give you a short-term loan that suits your financial situation.
Choosing the right online lender
While finding an online lender willing to offer you a loan will be easy, picking the best from the sea of different lenders isn’t easy.
To get started, ask a few trustworthy people if they have used any loan provider in the past. If you don’t have a relative or friend with such knowledge, you can ask a reputable financial professional. However, you should be cautious when taking recommendations from people who get some commissions from lending companies.
Check the credentials of the lender to ensure that they are authorized to conduct business in your state. It’s also important to check the lender’s rating with the BBB as well as the reviews on their websites.
The most appropriate $5000 income based lender is one who has sufficient experience in the financial industry and understands the market dynamics. You should settle for lenders who have a good track record since they already have a reputation to guard and therefore have a tendency to offer better customer service. Otherwise, avoid any fly-by-night operators who are characterized by little or no reputation in the market.
Look beyond teaser rates and calculate the APR
A legitimate lender will always strive to offer loans with transparent and reasonable terms. However, you’ll come across multiple adverts that quote the low rates just to get your attention. Don’t take the bait because the rates quoted “as low as” are normally out of reach for average borrowers.
Instead, settle on lenders who are free to reveal the exact APR for a loan without presenting you with multiple figures for the same loan. The APR should be made of the loan fee, interest rates, and the loan term so a good company won’t be presenting some additional rates.
Read the fine print in the loan agreement
While it’s important to deal with companies with a sufficient experience, track record of great service, nothing can equal a clear understanding of the loan agreement.
If a lender is good, they will include all the fees and charges in the agreement. However, it’s important to study the document just to be sure that there aren’t any hidden charges that can cause problems along the way. Normally, you’ll find the hidden charges disguised as application fees, pre-payment penalties or membership fees.
But if the agreement captures all the expected terms and rates that you are comfortable with, you can go ahead and sign it. You should know that this is a legally binding agreement and you are expected to honor the agreed terms.
Responsible borrowing
While it’s important that you be on the lookout for predatory lenders, you must exercise responsible borrowing. As a rule of thumb, short-term loans are only meant to be used to solve short-term financial difficulties. This is because most lenders expect you to repay the money in a few weeks or months.
In addition, it’s always prudent to draft a budget before taking a loan so that you can be accountable for the expenditures. If you realize that you can’t meet the loan obligations due to unforeseen circumstances, you should communicate with your lender immediately. In most cases, they are ready to help by offering alternative rates and terms that are suitable to your current financial state.
Final words
Online loans are not new in the market. In fact, most of the traditional banks that had not adopted the technology are now actively doing business online. This offers the advantage of lower operating costs, efficiency and convenience to both parties.
Since you can easily compare different lenders in a short time, you have the advantage of choosing the most appropriate lender to work with. The tips discussed here can help you navigate the pitfalls of online short term loans.
