Loans are the most common way of getting funds when in need. However, the process might not be very easy since different lenders have different requirements so you need to know exactly what you want and choose wisely. So here are some of the most important things you need to consider when taking out a loan.
1. Type of loan
There are many types of loans that could be taken up for different purposes. Some of them are; business loans that you could take to start up your own business, home loans which would assist you in building your home, personal loans which could be for any personal finance need, education loans that would help you in your education etc. It is vital that you know what you need the loan for an apply for that particular type since some types get incentive rates. For example, most lenders provide concessionary rates for education loans than personal loans.
2. Interest rates
The interest is the premium the lender charges for providing you with the loan. These rates could vary according to the type of loan as stated before. The lending market is very competitive since financial institutions are eagerly waiting to grab customers. Hence, it would be wise to shop around to get the best possible deal. Make sure there are no additional fees such as appraisal fees, underwriting fees, administration fees etc. are included in the interest charge.
3. Length of loan
The payment method offered by each lender will depend on the length of the loan. Some could charge extra fees for taking the loan for a longer period while some lenders charge an additional fee known as the ‘prepayment penalty’ if you pay off the entire loan early. Hence always talk to your lender and clearly understand the terms, conditions, guidelines of the payment plan. Your payment plan could also depend on the inspection of your due diligence in Hong Kong, performed by the lender.
Most lenders require you to pledge collateral as a security. A lender might perform a background check and analyze your best credit rating agencies and worthiness and then decide the need for collateral. Hence do keep some property with you that you could pledge.
5. Down payment
Not all lenders require down payments. However, if yours does then you need to be in a position to pay it. Down payments lower your total loan amount since the interest will be charges on the loan amount less the down payment. So, larger the down payment, lower the loan.