It is not un-common for people to get phone calls from banks informing them that their loan is pre-approved and just have to take it. The loans are offered in such an easy way that you might just get it. However, my wife warns me yet again to watch out for such phone calls on pre-approved loans. I’m not sure why I keep missing them while she gets to sees those useful financial matters where she reads.
Here are the excerpts from the story she ask me to read.
Pre-approved
The biggest benefit that is touted in the loan offerings is that the amount is pre-approved. It is shown as if the amount has already been given to the individual. The person to whom this is addressed has to understand that this is not some great benefit being given free but that there is a cost attached to the whole thing because there will be an interest to be paid. The process for getting the amount is not very long but this might not be the best route that a person can take for the purpose of getting a loan.
Interest rate
The interest rate is the most vital point in the whole transaction. And this is where the individual often ends up paying a heavy price. This is because the interest rate that is charged on the loan is quite high standing at over 20% in quite a few cases. This will be seen to be higher than what people can manage under the various different routes through which they can normally get a loan. Often there is no need for a person to pay such a high amount of cost but still people use the loan because it is present to them and available easily.
Other charges
One also has to be aware of several other charges that will enter the fray when the loan is taken. Often there is a processing fee that comes into the picture. Similarly there might be some other charge and this has to be checked for individual cases. All this keeps on adding to the cost for the individual who is taking the loan or making use of the available money.
Final decision
On the whole the person taking the loan needs to have a clear picture of why they are looking at this area for the source of their funding. In most cases there might be other alternatives available where a little bit of work could end up lowering the cost for the individual.
So, here are the summary of points to consider
- Pre-approved loans are not always the best choice
- Convenience comes at a price and are expensive
- There are extra cost involved and interest can go beyond 20%
- Always look for other alternative choice that can save you a lot on your loan
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