Procuring an installment loan is a way to bring your financial goals to life and to create a more positive financial situation for yourself. In your eagerness to get the money into your bank account, you might opt for the first loan opportunity that appears. However, jumping into an installment loan isn’t a good idea. You first need to review the common mistakes that people make and how to avoid them.
1. Not Shopping around
If you’re looking for an installment loan, you likely have some sort of fairly immediate or possibly even urgent financial need, which means that you’re likely to fall victim to a quick sell. What you must do is shop around not just to lenders in Illinois, but lenders that are nationwide too. Before you agree to the terms of a loan, you want to read reputable reviews on the lender to ensure your financial safety. Also, you must look for the lowest interest rate possible.
2. Ignoring Interest Rates
Your eyes might be fixed on the amount of money that a particular lender is willing to offer to you, but you must examine the interest rate carefully. Perhaps you’ve skipped over interest rates in the past because you didn’t really understand them. An interest rate is essentially the amount of money that you will pay each month on top of the principal balance. A higher interest rate means that over the life of the loan, you will pay back more money.
3. Lying about Finances
When you’re applying for an installment loan, you will need to fill out an application. During this process, you’ll likely be asked for a number of details about yourself. Some applications require the submission of many documents, and others do not. In any case, you might feel tempted to lie to bolster your chances of getting a higher loan. Not only is this action unscrupulous and unethical, but you also may end up with a loan that is too much for you to afford.
4. Not Reviewing Your Credit
Before you apply for a loan, you should really know what your credit score is. Check your bank because this entity might provide you with your credit score readily and easily. When you apply for loans, your credit score typically sets a small hit though the exact amount can vary. One of the factors that goes into your credit score is the number of recent inquiries. Taking out a loan means that the lender is looking at your credit score. Do keep in mind that the loan can boost your credit score in the long term. For example, if you are getting a loan to pay off your credit card debt, you are probably going to see an increase in your score in the near future.
5. Taking the Largest Loan
The thought of getting a nice large sum of money in your bank account is likely quite appealing. As you’re applying for installment loans in Illinois, you are probably receiving multiple offers, which is good because you get to pick the one that is right for you. The offers are likely going to be for different sums of money. Take out only what you need. Certainly, the thought of getting extra money is enticing, but remember that you will need to pay that money back. Furthermore, you will have to pay the interest on those funds. Get a loan for what you leave. Decline the higher amounts.
6. Skipping Payments
Once you have the loan, you must act in a responsible manner in terms of paying it back. Skipping a payment could mean that your credit scores takes a hit. Also, you could end up having your wages garnished in some cases if you are not paying your loan. On top of these deleterious consequences, you are making your financial situation worse. The loan will eventually catch up to you, and you will need to pay it. You might not think that one missed payment is a big deal, but it can snowball into a massive problem.
7. Avoiding Automatic Payments
The thought of having money automatically withdrawn from your bank account each month might feel jarring. You may believe that a better plan is to set up alerts in your phone or to make a note to yourself to pay the bill on its due dates. Automatic payments, however, can help to really keep you on track. When the money is taken out of your account and applied to your bill before you can even see the funds, you are not going to have the opportunity to spend the cash somewhere else.
Loans can provide you with great opportunities. However, you need to make the most out of them and use them correctly. If you avoid these mistakes and proceed with caution when it comes to your loan, you can really benefit.