It doesn’t matter if you’re Donald Trump, all of us have to borrow money sooner or later. There are a bunch of online personal finance gurus out there who might tell you different, but there just isn’t a way to get through life without borrowing, unless you keep your ambitions well beneath your earnings. That may sound like something that is very possible, but is it really? We’re talking about putting off a home or auto loan, potentially even going without higher education. Not many people can afford to pay for those things out of pocket, so borrowing would be necessary. Are you really able to skip out on those things, just so you don’t have to borrow money?
I’m going to guess not. If you’ve accepted borrowing as a part of life, at this point, it’s important not to just start borrowing willy nilly. Not all loans are created equally. There are multiple aspects to consider for each loan, even beyond the main details that we always think about. Here are some things to consider.
Price. There are people who have loans who don’t even understand what an APR is. An APR is Annual Percentage Rate. That’s the kind of name that doesn’t tell you anything about the thing it represents, so we’ll dig a little deeper. The APR of your loan is, basically, the price that you pay for borrowing that money. It’s a combination of interest and fees. Interest is a specific percentage rate that you’ll pay each year, based on the base amount of money you are borrowing. There will also be fees associated with each loan, for originating the loan, for processing, for whatever the lender dreams up.
These loans can have APR of anywhere between 1% to 35%, sometimes more. The latter is extremely high, but there are other loans that are meant to have extremely short duration, and carry WAY higher interest and fees to compensate. Verymerryloans.com has a bunch of examples you can check out, and you can get a quote if you like. It’s best not to take on loans that have high interest, as these will be more expensive in the long run, and will give you a higher chance of defaulting. If you default, you’ll likely incur way more interest and fees in the long term. You should also not take on loans that penalize you for early repayment. This sometimes happens, when a shady company wants to lock their customers in for the long (Expensive) haul.
Duration. This is the other major factor when considering a loan. How long will you have to pay off the loan? As mentioned above, is there any penalty for early repayment? There are tons of loan terms, from a week to thirty or sixty years. Some businesses take on loans which go farther than that, and world governments can pay in near perpetuity.
These are the two factors to consider when taking on a loan. All terms associated with your loan will pertain to either Price or Time, so if you’re having trouble understanding said terms, figure out which category each belongs to, then work out what it’s talking about from there.
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