Practical advice for choosing the right loan
Tips and practical advice for choosing the right loan at the best conditions
You wish to take out a loan, you hesitate between which credit organization to choose? Choose a credit at fixed or adjustable rate? How to get credit at the best conditions?
Choice of credit institution
Be careful in choosing your credit company, especially for establishments that accept credit files very easily, without supporting documents, or with a dilapidated budget … their rates are generally higher than those of others. You get your credit but with a rate nearing wear and tear!
Make the competition play, compare all the offers of credit of the financial establishments, for that to examine the nominal rate proposed, the monthly payment with insurance, the expenses of file, the cost of the insurance and the absence of penalties for a prepayment.
To compare these credit offers, it is essential to make a credit simulation with financial institutions. Generally, organizations offer free credit simulations with no obligation on your part.
During your simulation choose the amount, the type of credit, an identical rate base (ex: a fixed rate) and compare the monthly payments. Decouple the cost of insurance from the total cost of credit so you can compare it better later.
Choice of the type of credit rate
If you choose a fixed rate, no surprise: you know the amount of your repayments for the life of your credit. However, it is not recommended to take out a loan at a conventional fixed rate alone, but each time, you must include the modular option which will allow you to be active in your credit by varying your monthly payment upwards or downwards.
Regarding the revisable rate credit, we can go down or up depending on market fluctuations. It is determined for a certain period and revised periodically, generally each year on the anniversary date of the loan, depending on the evolution of a benchmark index.
The adjustable rate credit is advised if you make a loan on a short term so the difference must be around -1.5% for it to be interesting and require the risk taking linked to this type of rate.
Today we can speak of two new formulas of credit which protect the borrower: the revisable loan capped and the maturities capped in the event of rise in interest rates (the rise in rates is then reflected in a longer repayment period ).
In most cases, loan insurance is required by banks, especially if it is a mortgage.
This insurance covers death, permanent and absolute disability and temporary incapacity for work, it aims to protect your heirs who will be relieved of the burden of reimbursements in case of problems because it is the insurer who takes over to repay your credit union what you still owe them.
However, it is advisable never to take out the insurance offered with revolving credit. This one is almost always very expensive. It is better to take out funds independently. This must not exceed more than $ 5 for $ 10,000 borrowed