3 Loan Factors to Help You Choose the Right One
Are you new to the process of obtaining a loan? No matter what you need the loan for — such as credit card consolidation or your first car — the best way to find the right loan is to understand the factors that make them different. Use this short guide to help you learn how to choose.
1. Terms
Generally, the term of a loan is the length of time it runs. Terms are often stated in months — such as 24 months, 48 months, or 60 months — to allow for partial years. The longer the length, the smaller each individual payment must be.
2. Amortization
When a loan is referred to as amortized, each payment is divided into two parts: interest and principal. If your payment is $150 per month, for instance, the first $25 of a payment may go toward the interest due while the remaining $125 goes to the balance. An amortized loan means you pay off a portion of what you owe each month, unlike interest-only loans that do not.
Amortization, though, doesn't apply the same percentages for the entire life of the loan. Generally, the amount that goes to interest is higher at the start of the loan. As the loan ages, more and more will go to the principal each month. So eventually all of your payment will go to the balance of the loan, not interest and balance.
3. Origination Fees
Many loans charge a fee upfront in order to initiate the loan and do all the paperwork. This is often known as an origination fee, although it may have other names (such as closing costs for a mortgage). These fees vary based on what type of loan you get and what documentation it requires. Look for a loan with low upfront fees. Some loans also allow you to include the origination fee in the loan itself.
Start applying your knowledge of these valuable loan terms today by researching loan options. As you compare terms, annual percentage rates, fees, and amortization options, you will find the one that best fits your needs and budget.
Ardmore Finance offers a variety of loan choices for anyone. We will help you navigate the sometimes-confusing terms that you need to know. The result will be a great loan and the most success completing it. Call today to get started.
