When searching for a loan, you’ll want a loan that is flexible, that also caters to your unique needs. Whether it’s a personal, business, mortgage or payday loan, you need to be aware of the pros and cons of low cost loans. These days finding a loan is often as easy as searching online or making a phone call to a lender. More often than not, these lenders advertise offers that borrowers can’t refuse.
Most borrowers hope to find low cost loans, but they often fail to look at the bigger picture.
The downside is that lenders offering low cost loans may have hidden factors that affect these loans. For instance, while a loan may have low interest rates, there may be hidden origination fees that apply. Borrowers need to be prudent by asking the right questions and reading the fine print carefully before signing any loan agreements.
What are some of the pitfalls of low cost loans?
Underestimating lifestyle factors
Many people take it for granted that they also want to enjoy luxuries in life. They may enter into low cost loans which charge low interest rates for a fixed period. When the fixed period is over, the full amount of the loan may be payable –often leaving borrowers scrambling for money to make this payment.
Price shock can result when rates increase significantly. It’s important to not just think about the present when applying for a loan, but the future as well.
Lenders sometimes try to recoup the cost of low cost loans by charging exorbitant fees for establishing the loan as well as for servicing the loan. As a borrower, you need to watch out for extra restrictions, such as no extra payment options. Make sure that you read the fine print.