How to choose the right lender for your needs
Whether you are looking for a home loan, business loan, or other type of loan, choosing the right lender is important. With dozens if not hundreds of options open to you, your final decision can affect how much you will pay over the course of the loan, what type of loan you qualify for, and even your subjective experience when you are on the loan. apply and make payments.
So what’s the best way to choose the best lender for your needs?
Understand your personal situation
Before you start looking for a lender, you should make an effort to understand your personal situation. What are your needs and how could a lender meet those needs?
- Type of loan desired. Do you know what kind of loan you need? Do you need a mortgage because you are looking for a house for sale with pool in Arizona? Or are you still early enough in the process to be flexible about this?
- Credit score. What is your current credit rating? Does your business have a credit rating (if applicable)? Do you have time to improve that credit score if it means having access to a better loan?
- Income and debts. How much money are you currently making and how much debt do you currently have? These variables can have a major impact on the amount you can borrow. If you have time before you need the loan, you may be able to increase your income or pay off your debts.
- Short and long term goals. What do you hope to accomplish in the near future and in the long term? Is it more important to have a low interest rate or a low monthly payment? How much debt are you prepared to take on? How quickly do you have to act?
Then you will be ready to start looking for different lenders. You can do your own research online, collect recommendations from friends and family, or even use an online comparison service to find new information.
Be sure to study at least the following variables:
- Type of loan. There are many different types of loans and not all lenders offer all types of loans. Some lenders specialize in offering a certain type of loan, such as a mortgage, while others offer a variety of loan products. Research the options available to you with each business – and don’t rule out any options too early in the process.
- Interest rate and type. Most loans earn interest over time, regularly compounded by an annual interest rate. You will need to pay close attention to these variables, as they will influence not only your monthly loan payments, but also the amount you will be paying over the course of the loan. For example, with a 30-year home loan, even tiny fractional changes in your interest rate can make a difference of several thousand dollars over the life of the loan. Generally speaking, fixed interest rates are more advantageous than variable rates.
- Mandate’s duration. What is the term of the loan? In other words, how much time are you going to spend paying off that loan? You may be able to find a lender with an attractive interest rate and an affordable monthly payment, but if it takes you 30 years or more to pay off the loan, is it worth it?
- Closing costs and fees. Are there any closing costs or other fees associated with this loan? What will you have to pay to have the privilege of borrowing this money, in addition to the interest?
- Additional fees and penalties. Are there any other additional fees or penalties to consider? For example, if you prepay the loan, will you have to pay any fees? If you miss a payment, will you incur a penalty?
Make the last call
Once you’ve narrowed your list of options down to a few, you can work to finalize your decision.
- Reviews and testimonials. Look for reviews and testimonials from clients who have used this lender in the past. Are people generally happy with their experience? Or does this lender have shady practices?
- Personal experience. Do you have personal experience with this lender? If you contact the lender to ask questions, do you get an immediate (or near immediate) response? Looks like they offer good customer service?
- Negotiation. In some cases, you may be able to negotiate the loan. You may be able to charge a lower interest rate or work to waive some of the fees associated with the loan.
If you follow this procedure, you will be in a much better position to find the right lender for your needs. With a better lender and a better loan, you’ll end up paying less over the life of the loan – and thus have a better personal experience.