Loan help may be sought for various reasons. Some of the reasons may be to avail student loans, home loans, auto loans, home equity loans or debt consolidation loans. Whatever the case may be, the seeker may benefit from a survey of the available loans and then make a conscious decision. When shopping for a loan the borrower may check the rate of interest at which the loan may be offered, the proposed tenure, one's own credit rating, loan-to-value and debt-to-income ratio.
The credit rating of an individual may be considered as one of the major factors that determine the rate of interest at which the loan may be offered. It may be noted that lower the credit rating, higher the rate at which the loan may be offered. It may then be prudent for the borrower to first find out one's credit score. Credit scores may be assessed by Fair Isaac Corporation, commonly known as FICO. A FICO score may fall in the range of 300 to 850. The interpretation may be made as any score less than 500 as bad credit rating and 850 as the most secured credit rating. To obtain a FICO score, the borrower may have to submit all relevant financial details to the agency. It may therefore be better to keep a track of one's credit rating from time to time.
Often, loan help may be sought by people wanting to avail a home mortgage loan or a home equity loan. People with bad credit may also seek loans so as to consolidate their delinquent loans and improve their overall credit rating. Usually refinance is another option that may be sought. In any case, be it a first loan or a refinance, the lender often tries to find means of securing the loan. In case of home mortgage or home equity loans, the home becomes the collateral. In such a case, the rate of interest may be comparatively lower to the loan availed without a secure collateral.
Home equity loan may be availed in case of considerable equity being built on a home. Home equity may be arrived at after deducting the outstanding loan amount from the market value of the home. For example, if the home in the current market would be valued at $200,000 and $125,000 may be the outstanding loan amount, then the equity on the home would be $75,000. This amount though is not tangible. That means it cannot be taken that the amount may be availed as cash. Home equity means that the value that is thus determined may be tapped to raise another loan. Usually a home equity loan may be availed for home improvements or to pay children's college fees. In this case the home would be collateral and the total amount in the form of loan and sometimes may be the tenure of repayments would go up. Home equity may also be used to avail a line of credit often referred to as HELOC where the borrower may avail the entire or part of the worth of home equity in the form of revolving credit. Whether a home equity loan or a HELOC should be availed may be determined by the rate of interest offered or the amount of risk the borrower would like to take and on the terms of the loan.
The loan terms may be described as the conditions based on which the loan may be approved. The terms of loan may be found on the contract or promissory note. It may be prudent for the borrower to read carefully the terms under which the loan is offered. Special attention may be paid to the terms of delinquency and foreclosures so as not to be caught unawares. The amount paid in fees may also be negotiated. While availing any type of loan, the borrower may benefit from having each and every clause properly explained as often the language used in the loan agreement may be legal which the borrower may not fully comprehend.