There are loans for just about any situation one can imagine. From medical loans that help with unexpected dental problems to purchasing a car to getting a mortgage, the wide array of loans in Canada do a lot to improve the quality of life. If you’re thinking of applying for any type of loan, it pays to search for deals that offer all the benefits while allowing you to save money. Here are some tips that will help.
Compare Interest Rates
Never make assumptions that the interest rates offered by one lender are automatically the best that you can do. Spend the time to talk with other lenders and see what they can do for you. Depending on how long a term you need to repay the debt, even a small difference in the interest rate will reduce the amount you’ll eventually.
While you’re at it, find out how the interest rate is applied to the balance. This is especially important when you’re financing a home or a new vehicle. Is the APR factored on a basis of 350,360, or 365 days? Do the math and see how each approach impacts the total you repay per year. You might be surprised at the difference.
Remember that there’s more to consider than the interest rate. Before you decide that loan offer is really the best, check these other aspects.
Check the Terms and Conditions for Different Fees and Charges
While you may be in a hurry to sign the paperwork and get the money, read all of the terms and conditions first. As you go along, make a list of every possible fee, penalty, or other charge that could apply. The goal is to determine how much you would pay over the life of the loan if every one of those fees and charges were applied.
For example, does the terms and conditions contain references to account management fees? How about loan access fees? Do you see anything about payment processing fees? While not every lender includes these types of charges, they’re more common than many people realize.
The interest rate may be great, but if there is going to be some type of fee assessed every time you turn around, the benefits of that lower rate will dissipate quickly. Make sure you know what the loan will cost you before agreeing to anything.
Opt For a Shorter Term
While there are exceptions, opting for a shorter period to repay the loan could save money. This is true with mortgages and may also apply to some vehicles. When talking with the lender about a repayment schedule, see what the difference would be if you opted for a 20-year mortgage versus a 30-year one. Are the monthly instalment payments still affordable? What’s the difference in how much you ultimately repay? If you stand to save at least a few thousand dollars and the payments won’t be difficult to manage, the shorter term is definitely a good idea.
Make Extra Payments When Possible
Assuming that the terms and conditions are free of any penalties for early repayment, set up a personal repayment schedule that allows you to make additional payments on a consistent basis. Retiring the loan early further reduces the amount of interest you end up paying and makes a good deal even better.
Never Miss a Payment
You can expect any type of loan to include a penalty for late payments. Never miss a payment and avoid that charge altogether. The bonus is that timely payments also generate more positive feedback on your credit reports. That will help a lot when you need to apply for financing in the future.
Pay Off the Loan on Time
Even if you can’t make additional payments, resolve to pay off the loan according to the terms and conditions. Depending on the type of loan you’ve secured, the financial ramifications of failing to settle on time can be significant. This is especially true if you’ve secured short-term financing like a payday loan.
Your efforts to save money on loans begins with making sure you understand what the obligation you’re taking on and goes all the way through to making the final payment. Examine each loan offer closely and be sure you understand every aspect before agreeing to the terms and conditions. You’ll end up saving money and still getting the resources that you desire.