Understanding Loan Terms

Answers For Those Getting Personal Loans

19 July 2018

Stanley Simmons

There are many different reasons that you will need to obtain a loan. While getting a loan is a fairly routine process, there are some basic facts about this type of financing that individuals should review before they start the application process for obtaining financing.

What Is The Difference Between Pre-Qualification For Loans And Pre-Approval?

Individuals that have limited experience with loans may be unsure of the difference between being pre-qualified for a loan and having pre-approval. It is a common mistake for individuals to assume that the amount that they are pre-qualified to receive will be the same amount that they get. However, a pre-qualification is simply the lender's early estimate for the terms that you will be able to receive. This estimate is based on fairly limited information about the applicant, which can cause it to be very different from the final amount. The pre-approval amount is after the application has been reviewed, and you will be able to choose a loan amount up to the maximum that has been pre-approved.

Are The Fees For Issuing A Loan Always Similar For Different Lenders?

Some individuals will focus almost all of their attention on the difference between the interest rates of competing loan offers. The issuance fees that are required can amount to a fairly costly expense, and the fees needed can differ from one lender to another. Thoroughly reviewing the fees from each potential lender will be essential to give you a full understanding of the costs that will be associated with these loans.

What Happens If You Repay The Loan Early?

It is a common goal for people to want to pay off their loans as quickly as possible. For some, this will involve repaying the loan early. Before you decide to opt for this strategy, you should review the terms and conditions of the loan to ensure that are no penalties for early repayment. Otherwise, you could face the unpleasant reality of needing to pay an additional fee for repaying the loan. Luckily, many lenders will not have these penalties, but it will vary from one organization to another.

Does Defaulting Only Result In A Negative Report On Your Credit History?

When individuals are unable to repay their loans, it will result in a default. A common mistake can be for individuals to underestimate the severity of a default. In addition to triggering a negative report on your credit, it can also lead to the seizure of any collateral that was used to secure the loan as well as legal action to recover it. The exact steps and aggressiveness will largely depend on the size of the loan. For this reason, you should avoid taking on debts that you may be unable to repay.

Contact a business like US Community Credit Union for more information.

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About Me

When was the last time you realized you were in the red financially? Although most people don't think about their finances on a day to day basis, it can be easy to find yourself living paycheck to paycheck if you aren't careful. I began thinking carefully about the financial implications of some life decisions I was making, and I knew I had to make a difference. I talked with a loan officer about getting things together, and he was instrumental in helping me to work things out. Read more about my financial successes and failures on this little website. You might be able to avoid some of my previous mistakes.